You sound like me. I'm 5'6" and ride a 2001 KX250. I run a LOT of sag. I run about 5" just to get my toes on the ground. Alot of people say to shave the bottom of the seat off. I have not tried this yet, but I might. I also run the front end a few clicks out to make the forks compress more. Kind of like sag in the front, but not quite. I also raised the forks as high as they would go in the triple clamps. I'm pretty sure not many people could ride the bike very efficiently like this, but I know RC uses the same methods, only with a few more chop and weld mods. I only wish I could afford the bike lowering mods that alot of suspension companies are offering. That would be the best way to go. Maybe some day when I get fast enough for fine suspension tuning to matter I'll make the investment. At 30, that may never happen. :D Hope this helps a little.
I'm not much taller, and I've had great luck with shaving seat foam. Gets me where I need to be without comprimising suspension integrity. I think a shock spacer would be the next step to consider. I'd even consider sub-frame surgery before I would use my suspension settings to get me to the ground.