Delphinus: Thank you!
Willito: Well I went for it. I lowered the outside box 1". Only problem was that I then had to cut off about .75" of one end of the Utube otherwise it would hit the bottom of the skimmer overflow box. It worked perfectly....
...well a little
too perfectly. The suction was so great, that it sucked all the water out of the skimmer box, leaving NO water inside, which ended up sucking in air, and killing the utube
I guess my skimmer box is too small, and doesn't leave enough water inside to keep the water in the utube. I played around with it a little more, and got it to work for a few minutes, (big air bubble at top of utube). The water level in the skimmer box was quiet low, only about 1 - 1-1/2" from the bottom surface of the box). But with the water flowing down into the box, it was creating a few small bubbles which overtime, filled up the utube and killed the flow again.
So I switched things back (moved the outside box up back to the original height), and its working again. However I noticed with the .75" cut off the utube, the water height in the skimmer box is about .5" lower. The flow does seem a lot better, and I've had to increase the flow of the return a little more to match the same height in the tank.
So for now, it seems thats the this was the right way to fix things. We'll see how it runs for the next little while. I'll post a pic later tonight with the lower water level in the skimmer box.