Problems solved:

There's some clarification I'd like to make.

1. The Rear shocks body was a little taller than stock. However, it wasn't that much taller than stock, 2" like I measured.
2. The measured 2" was when I took them fresh of the box compared to fresh removed OEM's shocks.
3. I measured again this evening, it's almost the same, if not, about half a inch taller than OEM's.

However, the problem is just like I suspected.

1. Since the rear is lowered about 1.25", this take away 1.25" of movement on the shock body.
2. By keeping the shock height the same as stock, it'll be compress when the car is lowered, this limit the damping, rebound (vertical) movement.

So, to solve the problem:

I lowered the shock's tread body to about 1.25" (which is the max I could lower it anyways). Now, the shock is fully able to travel according to its correct valving. The ride is totally different. It handles like a dream, smooth, little stiff, but NO bouncy, yet remain the stock's like feeling. I'm now set at 6/18 front driver, 4/18 front passenger, and rear driver @ 6/18, rear passenger @ 3/18 and it's very smooth. Will try to up the settings on the rear to about half way and 2/3 fore a lil more oversteer. The way I set it up like this is because I'm the only person on the car 80% of the time, which makes it handles a lot more balance for my taste.

Thumbs up for Function and Form Type II coilovers. However, they still have some improvement that they need done on their designs. For example: The rear damping adjustment is impossible on my car, Infiniti G35C. The only way is to remove the wheels, remove the shocks, adjust it and reinstall it back it. Which takes lots of time (20min/side with hand tools only).

This system is by far one of the best I've experienced (after corrected the issues).

It's more comfort than JIC FLT-A2, HKS RS, Tein Flex, etc. but handles very much like those track system. Will try to fine tune it and push it more this weekend.

Thanks guys for the helps.