You might be able to compress the bellows enough considering you have a flex coupler. If so, then no need to adjust readjust/move the PSS assembly itself.
In any case review this:
http://www.pyiinc.com/downloads/pss-shaft-seal/pss-type-a-pro-installation-instructions.pdf.
To move the shaft aftward - you need to release the collar set screws (there are 4 - in pairs one each on top of the other). These screws are 1/4 - 20 stainless and the allen is 1/8. Be sure to use a new allen wrench/bit - not an old one that is rounded off. Move the the shaft as far aft as you need to keeping the stainless collar firm against the carbon block. Means the shaft moves aftward and through the collar. Use some detergent on the shaft for smooth movement and verify the shaft has no nicks - must be dead smooth otherwise a nick might wreck the o-rings inside the stainless collar. Then when you have enough clearance set at least one allen screw so the collar is held firm against the carbon block.
When the transmission is in place release the allen screw and move the shaft forward holding the stainless ring firm aftward against the block as you draw the shaft forward. If you don't you will have a blast of water so just keep it firm against the carbon block as the shaft moves forward. Hook up the shaft to the flex coupler. Compress the bellows to final position (exactly as the instructions say) and set the stainless allen screws. Use new screws (all 4 of them) and toss the old ones. Make sure to use Loctite blue when you set the new screws - bellows compressed. These screws are set firm (6 ft lbs) so you don't need to mash them.
Also if you do not have one (can't tell from your photo) put a second shaft collar forward of the main one - available from PYI for about $30 additional to the new set screw kit. This makes sure the shaft cannot go aftward and the main collar cannot move forward.
If you are the nervous type - prudent people should be - then put the boat the ground. Same instructions however.
Charles
ps Unless this is same for same transmission exchange shaft/motor alignment comes next. Alignments are difficult with a drip-less stuffing box. But drip-less or not much easier when the boat is out of the water.