The response looks better with the longer distance. However, what did Audyssey set the distance at? Was the SMS-1 in the circuit at the time? The SMS-1 adds a few milliseconds of latency, (it takes some time to do the processing.) As long as the SMS-1 is in the chain when Audyssey does it's thing, Audyssey will set the distance to account for the SMS-1 latency. Leave the distance that Audyssey set, even if it's several feet longer than the actual physical distance, and instead adjust the Phase in the SMS-1.
Here's what I do:
Set the SMS-1 to Preset 6, Phase to "0" and Audyssey EQ to Off.
Use the OSD to find the best locations in the room using the SMS-1 test tones with only the subs running, (speakers off). (Your current locations look pretty darn good. I would leave them where they are and try to "tweak" from there.)
After finding the optimal locations, turn on the speakers, run Audyssey at all 8 locations following the "Guide":http://www.avsforum.com/avs-vb/showt...5#post14456895
After Audyssey has done it's thing, check the crossovers. If any speakers are set to "Large" or "Full Range" set appropriate crossovers on them. Do not change any of the Distance settings at this point.
Then set the SMS-1 to "Setup" and set the receiver to "Stereo".
Go to Page 2 of the SMS-1 and adjust the Phase control until the response around the crossover point of the L/R speakers and sub is as flat as possible, You'll need to flip back and forth between Page 1 and Page 2 to see the response as you adjust the Phase. You may find that the "0" position is best because Audyssey has already compensated for the latency and the physical distance and no more improvement is possible.
Then run a Manual EQ on the rest of frequency bandwidth.
I like to add a little boost on the bottom end to provide a bit of a "house curve", but that is purely personal preference. Also the benefit of this is based on the ability of the subs to increase their output down low. If you try adding boost and the increase in SPL at the boost frequency is not as great as the amount of boost added, don't add boost. IOW, if you add 3 dB of boost at 20 Hz and the level at 20 Hz only goes up 1 dB, don't add the boost.
Good luck and have fun!