Howdy. Was at a long meeting tonight and just got home and saw your post.
The Blazer 2220 GTS is spec'd to have a 20" transom height and therefore should have a 20" shaft engine. This would be called a "Long Shaft" in industry terms. 25" shaft engines are called "Extra Long Shaft".
Blazer allegedly had some performance issues with the 2220 GTS (It would cavitate and blow out coming on plane and sometimes cavitate in heavy swells) So, as a remedy, some dealers started rigging the 2220 GTS with 25" Extra Long Shaft engines. They would then use hydraulic jack plates with large set back dimensions (like the 10" Bobs on your boat) and mount the engines all the way up on the bottom hole....and raise the jack plates all the way up to get as much as possible of the lower unit out of the water, to increase top end performance that they were loosing from the extra drag of the 25" shaft engine. Very counter productive.
The offset, (Or "step" as you are calling it) is actually in correct terms called a water flow foil. It is on the bottom of your transom, it is designed to allow water that is coming off the primary pad or running surface to rise up faster, (for lack of better terms) and allow higher engine height settings...which gives less drag and increases top end speed.
Sometimes dealers and/or consumers add an additional after market set back plates of various dimensions to enhance the above effect even more.
The additional set back typically will allow the engine to have a better "leverage" or better "lift" to give better bow lift which can oftentimes increase top end speed.
However there is always a trade off when you do that.......moving the engine back also moves the boats center of gravity back. This can slow down how fast the boat comes on plane, (called "hole shot"), increase how high the bow rises when its coming on a plane, cause the boat to porpoise at slow speeds and cause the boat to have ill handling characteristics in turns. So even though you may increase your boats top end speed by having a greater set back distance you typically hurt its performance in all the ways I just described.
Now lets talk about jack plates.....jack plates are made to raise the engine straight up or "jack up" the engine...hence the name "jack plate". Why do you want to raise the engine up? Two reasons...1.) By raising the engine up you get more lower unit out of the water which decreases drag and increases top end speed.
However, to get the full benefit of raising the engine up you need to use specific props designed to have their blades "surfacing"..but still able to have sufficient "bite" to hold the water well and not cavitate.
2.) To be able to run in more shallow water.
So, to summarize, it is important to understand the advantages and disadvantages of a "set back" and how to properly use and gain the benefits of a "jack plate"....and the differences between horizontal set back and vertical lifting by a jack plate.
If a boat hull is designed correctly it should not need an excessive amount of "set back" to make it perform correctly. I question the need and or advantages/disadvantages of the large set back your boat now has on it.
That much set back may be hurting your overall performance rather than helping it.
The other issue is why it has wedges installed on the plate? These wedges are are allowing your engine the ability to have about 5 degrees of additional "under trim". This is usually done to stop porposing at slow speeds and to improve hole shot...which is aggravated or caused by having the large set back plate distance...which typically actually causes porposing and poor hole shot.
With all that being said, understand that I cannot give a definitive accurate assessment of your set up without seeing the boat in person and actually running it. With solely what I see in your pictures, it is just my best guess, summation/opinion that the 25" shaft engine, the large set back plate dimension, and the wedges all have been added to for a performance reason. Again, I would have to actually see the boat and run it to be absolutely sure.
As far as the correct engine height, on a correct set up, I would start by mounting it on the 2nd hole up on the jack plate and adjusting the jackplate vertical height as needed.....Start with the plate all the way down, and trim at full undertrim. Then put the boat on plane and adjust the trim amount and jack plate height for the best performance.
TAMU Wildlife and Fisheries Sciences
Boat racing is like a beautiful woman.......expensive, high maintenance, but well worth the fun!