I'm not saying this from personal experience but from extended talks with a few guys who work at a yamaha dealership and at a performance motorsports place. They've both advised me against lowering a bike. Somethin somethin about it throwing off the perfect balance/ratio crap. I don't know if they're just Yamaha fanboys or if there is some truth to it? Another reason I was looking into the 600s is my insurance is significantly cheaper from the 1ks.
i'm sure there is some truth to this, but how far are you really going to push the bike? are you a moto gp racer? normal/ aggressive riding is not going to be affected by a 2" drop.
a 600 is never going to come near the performance of a liter bike without double the bike's worth in mods. we're talking internal engine mods, sprockets, and tune. if you truly want 1k performance and your only issue is that you're too short to push it, just lower it.
if it's a cost thing, maybe consider a 750? still under that magical 900 number for insurance, but more performance than a 600 (not a ton mind you)
my body fits well on new age gixxers. i wouldnt ride anything else at this point, unless of course i didnt have to pay for an aprilla or ducatti.
one of the most popular bike that is still affordable and has awesome performance is 05-07 gsxr's. people still swear by them. and your insurance should cut you a break if you buy an older 1k.