I answered my own question. Progressive states you can use the PVC spacers or "shorten the stock spacers and use". With a tubing cutter, or cut off saw, it should be too hard getting a straight cut on the stock metal spacers.
On the subject of using an impact wrench on the bottom dampers. Low and behold, when working on a "parts fork" assembly today that I absolutely ruined the fork top caps on trying to get them off, one of the bottom damper bolts would not move. I stripped it, then drilled the head off because I don't have an impact. Otherwise I would have used it. The damper it threads into is steel of course, so no worries about stripping aluminum.
You know what the forks with the stuck top caps and stuck bottom bolt most likely had in common? Over torquing both. The top capps were "burred" from over tightening, thus locking them into the tubes, and that bottom damper bolt was way, way over torqued. I assume a previous fork rebuild did the trick, thus reminding me torque values are set at minimum and maximum for a reason.
The progressive install is pretty straightforward, telling you to cut spacers for the FT500 at 5.5", but the Race Tech springs get a little more technical about pre load, static sag etc.....