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Ok, I have a photo the saddle from the side.
The measurement in between the D and G strings is just a hair under 1/16".
As for the nut, the strings touch the 1st fret when pressing at 3rd. No space at all.
I have a yard stick for straight edge, maybe too long.
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Hey Mike, thanks for the picture and measurements. To me, that looks higher than 1/16". For a point of reference, a medium gauge low E string (.054") is a bit under 1/16" (.0625") and I think the height from the top of the saddle to the bridge looks considerably higher than that. Of course, I could well be wrong. If you would, double check the measurement. With that said, by looking at the break angle of the strings over the saddle, I don't think there is much room to take the saddle down without doing something else that would fall outside the scope of easy to do (like a reset or shaving the bridge down). What happens when the saddle gets too low is that there is not enough break angle over the saddle. Reduced break angle means less downward force on the saddle and less sound. I have seen many people choose action over sound by having a very low saddle, so not going lower on the saddle is not an absolute. Let's take a closer look and see what we get. If your camera is handy a similar picture from the low E side would be great.
On the nut, it sounds like the nut might actually be a bit low. Since your overall action is high, that's ends up working ok. What might happen if you get the action lower is you might find open string buzzing when there is none elsewhere up the neck. We'll worry about that if we get there.
As far as a yard stick for a straight edge to check neck angle, that probably won't work. In all honesty, checking that in this case probably is not a big deal as the neck angle is a relatively expensive item to address (unless it would be covered by a warranty). I think our focus here is to make the guitar better, not rebuild it. For the time being, we'll assume the neck angle is what it is.
Ok, so where we are now is that the nut can't go lower, the neck angle is what it is, the saddle maybe shouldn't go lower and we think there is a some excess relief. What I would do next is straighten the neck out a bit to reduce the relief and see where things fall at that point. I would like to caution that adjusting the truss rod can cause something to break. I have never personally had one break, but it is a possibility. A broken truss rod is not a minor fix and on less expensive guitars, it could effectively total the guitar. If it gives you pause, taking the guitar to a luthier for a setup (which would include truss rod adjustment) is fairly inexpensive. It used to be about $25, but I think local places typically now charge about $50. I could be off on the cost, but the point being, it's not that expensive.
If you want to adjust it yourself, the first step is to find the end of the rod. Looking at your headstock, it's not there, so it's going to be in the neck block and accessed through the sound hole. If you look at the frets.com truss rod link in the original post it could help you visualize where to find it. Most truss rods I have seen in acoustics use a 5mm allen wrench for adjustment. I can't tell you what yours has. You may need a mirror and a flashlight to determine it. Sometimes, they are buried way back in the neck.
Assuming you have found the truss rod and you have the tool to match, there's not much to do except get on with it. If you read the Frets.com articles, you are already familiar with how it works. Turning clockwise tightens the nut, which compresses the rod, which straightens the neck. Here are some tips:
If possible, it is a good idea to lubricate the TR nut with a tiny amount of oil. I have made adjustments without doing this, but lubricating is good practice.
Even if you are tightening, I like to loosen first. That way I have an idea for how it should feel as I tighten it. There is a limit to how far a nut can be tightened, and you don't know where you are when you start. As you are loosening, keep track of how much you have loosened it so you can get back to where you started and then start tightening from there.
I detune a guitar before tightening a truss rod. Otherwise, you are fighting against the string tension. I will sometimes make small tweaks to loosen it by detuning only the middle two strings (to ease access).
If the resistance to tightening suddenly gets more strong or you hear a squeek, stop. You might have run out of thread for the nut. It's a feel thing, but you shouldn't have to really muscle it. If it is very hard to turn the nut, it's time to back the nut out and inspect closer to figure out what is going on or take it to a luthier.
Small changes of the rod make surprisingly large differences in relief. I make my adjustments in 1/8th a turn (or less) and then check the progress. If I know I have a huge way to go (like I just removed the TR nut to lube it) I'll use a 1/4 turn, but once I am anywhere close, I back off to smaller adjustments. It does require alot of back and forth between adjusting and measuring, but breaking stuff stinks.
If you are going to do this with the strings on the guitar, the de-tuning and tuning will kill the strings. Don't change to new strings right before you adjust the relief I said "if you are going to do this with the strings on the guitar." You can rough set the relief without the strings, but it requires a good straight edge. Basically you set the neck to flat without strings and then when strung, it will be in the ballpark.
Once I had adjusted my relief just the way I wanted, only to find that a few days later it was different. It can take a bit of time for the changes in TR tension to totally settle in. If it happens, no big deal, just fine tune it a few days or weeks later.
Last but not least, remember what you are doing is setting the relief, not setting the action. The action might be lowered by properly set relief, but going beyond the point of proper relief is only going to bring bad things. I have seen guitars (including a nice Taylor) that were pretty well trashed because the owner cranked on the truss rod trying to force lower action. I think the odds of something bad happening are pretty small if you go at it conservatively and thoughtfully.
Best of luck,