I think cutting the extreme is going to hurt its soft powder abilities, it is already quite a bit stiffer then the 5.1 to begin with and I would think end up making it really trench...(just my opinion though)
I have heard nothing but good about the holz drop kit, but havent used one, there is plenty of clearence up frt on a dragon(with no frt cooler), the tight spot is on top right at the end of the tunnel coolers... when I did kurt's(fastrax) drop and roll I ended up with plenty of room to run the 3" extreme if I wanted... I will say this, kurts suspension mods(part of the D&R kit installation) do make the sled ride/handle better then it did stock....I already had my skid setup to limit ski lift before the D&R, and I ended up having to undo all those changes after the install because it kept the ski's planted to good...I am hoping Ak rev rider will check in here, jim runs the powerclaw with I think the holz kit so he might be able to enlighten us about it and how it does for him....