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Mike,
What you've described is expected. With no-preload, full movement of your mass will cause the system to bottom out at 260 lbs. Think of it this way, once a mass is in motion, it tends to stay in motion so as you dialed the pre-load down, you got less movement and travel of your mass. So we want to control that movement. with both the BodyFloat AND via your riding style. At 260, you are near the top of our recommended weight scale. The Orange/Orange springs will provide you with an 'A' feel as per our chart. Regarding getting your post set to neutral, compressing a O/O to 4 will provide very little, if no, active range but should stabilize your mass. Backing off those 2 turns into 'Cadillac' mode should give you some reprieve but I think you can get more with some tricks.
It sounds like you're a relatively upright rider and therefor riding with more percentage of mass in the saddle. I'd recommend removing one of the upper elastomers. this will give you a bit more free travel, the trade off is that that bottom out will be more pronounced when you hit bigger features. The goal here is to find the right combo of travel and still support your weight. The bounce you mentioned should be eliminated by removing the elastomers and working on smoothing your pedal stroke. Again, with a higher mass, the system is going to react to your mass more. Couple of comps for you: we have a local boy who's 265 and rides an Orange over Black on a road bike. His stroke is smooth and has plenty of travel for his riding style and desire on his road bike, pre-load is about a 2. An industry Gravel-Grinder reviewer is 240 and rides a Orange over Black and swears by it. I've also put a 350 lb guy on board and he naturally bottomed out the system (Orange/Orange) when just sitting, but as he engaged the pedals he felt the system offering him plenty of support...and suspension. So generally, the lighter the spring rate the better the isolation and control you'll achieve. Be conscience of both your pedal stroke and adjusting slightly as you roll over features that need attention (like speed bumps or holes in the road), but you should be able to maintain your output through a much more broader range of terrain surface features. When climbing you should really be able to take advantage of the system and use your mass to your advantage.
So remove those upper elastomers (with the post on your bike, and saddle on, remove all pre-load, remove both lower side links by taking out the small side bolts and gently prying off the links, the system will cantilever forward and carefully remove the upper spring guide, remove the elastomers and put it all back in place. Those side bolts only get 3nm of torque). When you set your neutral, practice doing this while riding and using the feel rather than just sitting on saddle stationary. Fine tune the pre-load to achieve a firm feel at your regular output and position. Goal here is to build a solid foundation. Then dial in your saddle height. From there back off the pre-load to your desired feel. It's important to build the proper foundation for your mass and riding style, then create the feel you desire.
Regarding your saddle selection, most riders have gravitated towards firmer saddles with better results on the BodyFloat. You shouldn't need a cushy saddle that often makes matters worse by increasing surface tissue contact. Another option that is to use a Brooks or other leather saddle. The flex of the leather provides a nice compliment to the system. Hope this helps...call us directly and I'm happy to assist more.