Tink,
Generally speaking when you talk about height it is with the prop shaft parallel with the bottom. The height numbers change wildly when the drives are trimmed.
It is beginning to make more sense now. Mid 80's boats drives were usually buried. Down about 7 to 9 inches. You mentioned with drives neutral you were 5 inches down. That makes sense if you have 2" shorties.
So to get to the target height of about 4 but not less than 3 you do need to go up another inch maybe 2. You at 5 down are still relatively deep. Most boats built more recently start at where you are now. Velocities are the first I am aware of that started raising their drives on production boats in late 80's. There are likely others too.
The measurement I previously mentioned relating the prop shaft to the bottom of the V is not a hard fast rule just something to keep in mind. Boats with 24* deadraise can run side by side heights higher than 26* boats as an example. The point is you still want props to be biting as the hull releases.
Make all height measurements with shafts parallel. That is the constant that makes any discussion on heights possible.