Compression heights become an issue when you need to bridge the
oil ring over the pin. However, this is common in all 347 SBFs, which is a very common side. They have a 1.09 compression height.
4" stroke LS1s, a very common size, use a 1.115" compression height.
Back when the FE was new (during the Eisenhower administration) a .300 top ring down would have been minimal. No you can go smaller. Also, you will probably use a 1/16, 1/16, 3/16 ring package, which is large by 2006 standards, but not 1965 standards.
Using a 6.7 rod, a 4.5" stroke is still a 1.2" compression height. Nothing to worry about.
However, first consider how expensive a motor you are building. Using a 4.25" stroke with JE pistons, SCAT H-beam rods, and a SCAT cast crank--all off the shelf--is going to be $4000 less expensive than billet rods, custom pistons, and a custom billet crank.
A street motor would never know the difference. Are the 30 extra cubic inches worth that much? I'd be more inclined to spend the money on an aluminum block, BT heads, and a J&S knock sensor.