Question Is this the standard setup for this EBMM Vintage Trem on a Luke III?

No worries; your body will be fine.
I pull it up all the way frequently with no bad results. I also turn the arm backwards to slap it for flutters.
 
Hello String. Yes, that is correct. You should have 1 1/2 steps of back pull on the G string.

Thanks, Mark.

oops, my bad. I thought String said that his is floating and he was wondering if it shouldn't be. Now that I look closer, maybe that is resting on the body.

If it's resting on the body, you need to adjust the tremolo claw until you get 1 1/2 steps of back pull on the G string. That will give you about 1 step on the B string and 1/2 step on the high E.
 
Thanks guys! That's what I thought. I need to take it and get a pro setup on it. I just love this guitar and the tone out of it.
 
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