If I were to build it, I would want something along the lines of the monoshock setup above. Something without much space between the engine/associated parts and the rear wheel. I have the unused space behind the engine on hardtails. As far as shocks, I am not sure if you could work them in, but many people use GSXR shocks (600-1000) and Kawasaki Ninja shocks (ZX6R and ZX10R) to upgrade the suspension on their Suzuki SV650/1000. Not sure if this would be a desirable suspension on the XS though.
I think the grey bike has the right lines.Its more of a bobber than a chopper and not too low so handling should be good.I'm sure some would prefer a lower bike with more rake and longer forks but I think this bike is just about perfect.I know you are working on one style right now but I think at some point there could be enough demand for both styles.