Upgrading my SR's suspension - More Questions!

Regarding the old style damper forks even if on a 'newer' bike:
Having recently done my '81 SR500 forks the spec is 6.15(US) oz. per leg. There is no problem with using 7oz.
Many (most?) now are recommending the fully compressed fork leg into slider (NO spring) and measure from the tube top edge 6" to the fluid. Idk, just seems to me that getting that precise with an old damper fork system is pretty OCD, and Im kinda OC (but I wont go so far as to say D), so Ounces works for me.
The less air space above the oil creates kind of a progressive air 'spring' that gets stiffer as it compresses so (hopefully) preventing bottoming out and less brake dive as it gets further compressed in a hard brake scenario.
Note that 7.5oz seems to be safe, 8oz may be pushing it. Your dont want too much oil or the fork can hydrolock and/or blow the seals, or so Ive read.
The spring rate seems to be the primary compression component, and having the right spring for your and bike weight combined in the 'sag' is essential. Higher perf riders seem to prefer straight weight springs, Im still fond of progressive springs for road use, I like more cush on our ever deteriorating roadways here.
As regards the old SR500's, they share the same 35mm fork as the XS650 with a 150mm travel, but not the same springs from the factory. The SR springs are about 17.5" prog c/w a 4.25" spacer, the XS are (from '78 on) 18.97"/482mm +- 6mm, prog, no spacer afaik. I suspect they have a higher 'weight' rating as the XS is a heavier bike. I hope to be trying a set of used, but still within the length spec, XS springs but perhaps not until next year.
I have tried adding pre-load spacers, about the limit for me is what I can get to just catch the threads and turn in when pushing down with a T wrench (pls DO cover the tank with a heavy pad) but one Must be very careful of crossthreading like that! Note that adding preload puts the now more compressed spring coils closer together; ie, closer to coil bind and reducing travel. If one is adding pre-load for the set up most used most likely a stronger rate spring is needed. The exception is if one has preload adj. caps (the old Yam for some XS650 models are 3 position), you typically do the set up in the middle position so you can fine tune 1 notch either way.
Preload is a handy way to experiment though without buying new stronger springs and finding out they are wrong?
The damper tubes can be modified to the NEW(ish) variation on the 'Minton Mods' which is drilling the damper rod holes to achieve a different flow rate of the fluid. Warning, This May Have Too Many Variables (for the new 'fork tuner'). And NOTE I say NEW version; the original Minton Mod article(s) were WRONG, possibly due to editing or ? Before modding Be Sure You Use The Updated Drilling Info!
I suggest starting with the unmodded damper tubes, getting the spring rate right and using 7 to 7.5 oz of proper fork/shock oil rather than engine oil and develop a 'baseline' of your fork response. The fluid 'cSt' rate (charts easily found online) is what to go by in choosing what to use in going 'up or down'  (the higher the cSt rate the more resistant to flow the fluid is though a 1mm hole).
Of course, if you stay within one family/brand of fluid their '10w' will the thicker than their '5w', but what if you cant get that brand? You find the cSt of what you have used and pick an incremental step up/down from the chart of what product you can get.
Fwiw, I started with an easier flowing fluid for my baseline with intent of creeping up in cSt rate as needed.
Ime, the fluid 'weight' will have the most effect upon the rebound action of the fork, far more than the compression. You want the rebound to slow the returning spring so it doesnt hop out of the hole but stays more compliant to the road surface; ie, if the front seems to be rebounding too fast you need a thicker/higher cSt # fluid.
With the spring rate right for you, initially in sag and in ride, and the rebound is good, the oem damping design may be 'good enough' but the only way to know will be to get those first two as right as you can.