Well I have finally gotten around to shortening my gear change lever. I followed the idea suggested by Dhula. I ended up using a 2.5" long 1/4" diameter bolt to replace the gear-change peg, which required a bit or work with the angle grinder to cut it down to the right length. I didn't tap the hole, firstly because it wasn't really necessary and secondly because I didnt have the right size drill bit. The internal diameter of the peg-rubber is slightly larger than 1/4" so I wrapped electrical insulation tape around the bolt to thicken it up. Here is what the peg looked like:

I used my trusty angle grinder to cut and shape the end of the gear change lever. I think I ended up cutting off a total of 10mm, which doesnt sound like much but it feels pretty substantial when you are actually riding. So here is the before and after, at sort of the same scale

:

At this point I re-fitted the lever to my bike. The modified position was great so I headed off for a test ride.
Where do I start? Unfortunately, shortening the lever had a pretty significant effect on the feedback and force required to change gears. Changing up was more difficult than usual but still manageable, but changing down was terrible. About twice as much force was needed to change down and there was absolutely no feedback at all. I think most riders would consider the bike un-rideable at this point. I ended up riding the bike for 2 weeks in this condition and quite quickly adapted, at times I actually liked it, but it was clear something needed to be done.
Cutting the gear-change lever shorter meant that changing gears required less foot movement, but more force. I needed to regain the leverage I had lost. The solution I came up with was to offset the loss of leverage by lengthening the gear-change arm by the same amount.
It was a pretty simple process. I cut two strips of mild steel to bracket the gear change arm, allowing me to extend it. They are held in place by two 3/16" bolts on each side with Nylock nuts to withstand any vibration. Here are the front and rear views:


I extended the length of the gear change arm by a total of 10mm. Any longer and you run the risk of it hitting the plastic cover that goes over the gear change mechanism (I found this out the hard way). Once in place I adjusted the threaded rod so that it was at it's minimum length which left the gear change lever in a comfortable position. My first test ride gave great results. The gear change lever is in a pretty good position, it feels the same as stock when changing gear.
So all in all, flipping the foot pegs and doing the mod I just described, has resulted in more leg room, a more comfortable foot position, and the gear change feels as good as it ever did. So I am pretty happy

Here are the final pics:


If I find any problems, I will let you know.