Well somewhere around 6" is what you are looking for.  The problem is the length of the trailer being a little shorter having the dropped nose.  These set ups work great on flatbed trucks but alittle tight on trucks with regular beds.

My opinion I would raise it back up one hole or another fix is to get the trailer dealer to change out the slide in part of the hitch to the older style that just uses the bolts on the outside to make the adjustments then you can fine tune the adjustment you want.

Or the last thing is to block the axles of the trailer 2".

Thankyou for your replies. I have a cushion coupler hitch and my axles are blocked 2inches already - from factory new.  I can't hook it up right now to measure exactly but I believe it maybe 6 inches... from eyeballing it...It sure looks close to me from the way it was- (up one hole)-They (factory) like the trailer level as possible for warranty purposes.  My truck wasn't there when they changed it and when we hooked up to go home, no one really paid attention ...we were all in a hurry and it wasn't mentioned... until we got on the road and noticed. I will have to hook up and make sure it is at least 6 in... hope so! I just needed to know what the shortest distant should be at least...Thankyou! It will bear watching that is for sure...! Yup-flat beds would be best.

 A "dropped nose" is to make more room in the nose part in the LQ so we can sit up-just have more head room. Some LQ noses don't have much room when you get a mattress in there- easy to bump head on ceiling... 

Is your truck a 2 wheel or 4 wheel drive?  I it is a 2 wheel drive and you are 100% sure you already have 2" blocks you should be level with zero issues!

But on the other hand if you have a 4x4 you will either have to live with it being a little off or replace the 2" blocks with 3" or 4" blocks which is going to have a greater step up in the rear for the horses.  This is the main problem with buying a trailer with a dropped nose, you gain room inside but really can not use a 4xr4 truck unless you have a flatbed or larger block to get it level.

Sounds like 7" is plenty.... I hooked up Sundowner last night to a friends Dodge dually 2 wheel drive and it only had around 2" between the bed rail and trailer.  But I also have my hitch rasied all the way up so the trailer is level with my flatbed Dodge.

This is what I would try if the trailer is still to high in the front.  Raise the hitch to the next setting and recheck.  6" is just kind or a rule of thumb, but with in an inch or so you sound be fine.

So my point is if I was to extend the hitch on my trailer to hook up to my friends Dodge, I would have good clearance and the trailer would be level.  My trailer does have the dropped nose.