Turkman and Majicmarker, I've solved my binding issue. I replaced the servo horn with another that I heated and bent. In addition, I made it slightly shorter.
The photo below shows the new servo horn and the suspension is relaxed.
The next photo shows the suspension compressed. The stock horn was not only a bit longer and straight, but had additional "meat" on top. as shown in the RC4WD photo below this next one. With this following photo you can see that I now have plenty of room between the servo horn and the axle housing... and you can probably tell with the original set up where I was having issues.
I also figured out the whole O-Ring dealio. I went ahead and removed one of the internal ones for a test. It's great and will likely leave it out. Thanks Turkman for at least planting the idea in my head even if it was a misunderstanding