i wish i had found this sooner. kraigwy, i read a few manuals and if your original sight was set on the one hundred mark you were actually setting it to 1000 meters which would explain the 8 inches high. the manuals stated that the mosin sights are set in 100's of meters. i hate to say it but you effectively limited your sights to 200m or 220 yards.
The 8 inches high POA/POI discrepancy is due to changed barrel harmonics when not mounting a bayonet. I haven't seen a Mosin (including mine) that didn't shoot high at 100 yards.
I'm not sure where you got that kraigwy set his mosin at the 1000 meter mark. That's just silly. He pretty explicitly stated it was at the 100 meter mark, which is as low as you can put the rear sight. Milling off the bottom of the sight allowed the sight to just sit low enough at the 100 meter mark to hit POA/POI.