Andy,
Normally you want your cavitation plate somewhere between dead even with the bottom of your boat and about 3/4" below. This is one of those things you just have to play with though, every hull is a little different and performs differently. The higher you can get your motor, the less drag your boat will have. But be carefull, once you start getting that cav. plate above the bottom of the transom, you can get into issues with both cooling of the engine, prop cavitation, and steering, as well the prop breaking out in turns... As long as you don't get the cav plate above the transom though, you'll never have to worry about any of these issues.
An easy way to play with height changes is to use plywood as a shim between the motor and the transom.
Keep us posted on your progress.