Alright, I wrote the above at work after day one of tinkering. I have just finished tinkering again for about 5 hours today. I'm by no means an expert but I did learn a few things that might help.
First is, as you may have noticed, the owners manual and service manual speak about preload not really for the purpose of adjusting sag, but for increasing or decreasing the strength of the spring. In other words, the shocks are not linear, they're progressive. So, if you are working alone as I was today, if you raise the rear shock by say, 1/8th of an inch as the bike rests on its stand, that is not a realistic depiction of the sag you have adjusted. Its actually 1/8 times some x-value representing the progressive constant (I'm assuming its a geometric relationship - if so, that x-value would be a handy thing to know. But it might be an exponential relationship instead. Anyone know?) This is important to realize so that you don't over-adjust the rear or front pre-loads when setting sag -esp. when you're working without an expensive bike stand or working alone.
The bikes are unboxed for the proverbial 150 pound rider, so if you're bigger you will need to raise both the front and back preloads (clockwise adjustments). Experiment with it. Something to keep in mind is that you will want to maintain an angle that allows you to distribute your weight onto the back and front in some comfortable yet functional sweet spot. Too far forward and your wrists (if they're like mine) will fatigue after about 100 miles. Too much weight on the back and your front will shake and bounce as you go.
After you get the front and back preload right, adjust the damping settings on the compression and rebound in the front. In general, I preferred to have slightly greater dampness for rebound than for compression (the exact opposite of what I describe above). I was able to best achieve a "planted" feeling over bumps this way. For reference, I set my rebound to one and a half turns counterclockwise from the fully-damped position (fully damped is fully clockwise). Front compression is about 2 turns away from fully un-damped (the fully counterclockwise position). But, you will need to experiment to get it just right.
Same principle on the back. Slightly more damping on rebound than on compression. Possibly a lot more damping. It depends on how you ride I think.
One final thing. before you suit up and take your bike out for a spin to test your settings, go ahead and grab the front break, lift, and shove down on your front shock to see if you're even the ballpark of where you want to be. Same for the back. The bike should compress, then return and settle without bouncing within a second. If it returns and then bounces back and forth at the top, or is too slow to rebound, don't bother taking the bike out for a spin as you are probably quite a bit off from where you want to be.
P.S. Also, as you reduce damping on compression on your front forks, you will dive more under hard breaking. You need a certain amount of damping there just so you don't lose control in an emergency breaking situation.
edit: here's the service manual for 09-12 models anyway:
https://docs.google.com/file/d/0B5pIzP28qdp-dWpaVVpSYzdNM3M/edit?usp=sharing
