I've got about an inch of spacers between the fender and frame now, but I would like to close that gap up a little. I have to see what the maximum travel of the rear wheel is before I move the fender down any more.
The lights are all good to pass inspection in PA - i'm a resident of the keystone state too. I was worried about the taillight not being visible on the left side also, but my license plate bracket sticks out far enough that it can be seen unless you are looking at it straight on from the side. Fyi, the PA motorcycle law does not require turn signals on a bike.
I like the idea of an integrated taillight/turn signal. Custum Dynamics makes some cool LED ones, not for the savage of course:
http://www.customdynamics.com/yamaha_honda_kawasaki_motorcycle_led_taillight.htmthis type of lights would be awesome if you could adapt it or make something similar: