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I hung a pair of counter-rotating Yamaha 300's on the Whaler Drive on my 1989 Whaler 27FC last year. I mounted them all the way up, but I used a pair of Mercury Revolution 4 props with them. These props do well high in the water.
I would think you would definitely want to mount any prop/motor combo at least 2 holes up on a whaler drive. The old Yamaha 200's that I removed when I replaced them had Yamaha saltwater series props, (3-blade), and they were performing fine at 2 holes up mounting.
By cutting down the size of the fuel capacity on your boat, the range will be greatly reduced. Are you doing this in order to fit the tank after the stern mods? If the larger tank will still fit, I would sure use it.
After installing the new 300's that are four-stroke engines on my boat, I saw an increase in fuel economy from the old 2-stroke 200's, but I still needed more than the 175 gallon capacity I had with the original tank. I have added an ATL fuel bladder and quick-connect hook-up to supplement my fuel capacity for my long-range excursions. If you don't have room for the larger tank, you may want to consider including fittings and valves for this.

Good luck with the new motors! Be sure and consider the props you use with them in deciding how high to hang them.