Pianotech

This is (I believe) a Mark III disklavier with a silent play system.

Am I reading this correctly (see pictures)? Does the letoff for these pianos really need to be at least 5.5mm from the string? That seems excessive...

Oops the main photo didn't attach

Nathan, I'm not an expert at this but it seems the hammer must let off before the shank contacts the hammer shank stop or else the jack will block. 

Yes, the setting displayed on the sticker is correct. With the Silent feature engaged there is a soft rubber block that prevents the hammer from hitting the string. If the hammer letoff is set closer, like a normal upright, with the Silent feature engaged the hammer would block against that rubber stop when engaged. Most people will never notice the difference.