Just to make it clear - the shocks I was referring to are the #54000 TRF M-Chassis Shocks (with the Short Spring Set #53333). These will naturally drop the ride height to around 5-6mm. Don't get too hung up on ride height, lower arms level is about right.
What diff are you running? This and the tyres (obviously) are a massive influence on the handling. I really can't reccommend the 3Racing diff highly enough. Hard to get hold of though. If you have a ball diff of any kind, get this really tight - try not to break the diff bolt though, eh.
Tyres-wise, yeah not much you can do there if you're stuck with those two choices. The glue trick is very good, keep applying it regularly (every few rounds) as the glue will peel off with use and effect the handling. If you're allowed to change inserts, make the front inserts harder than the front (this is like having higher tyre pressures, therefore less grip, which will help to balance the car - although it will give less steering on-power too). One other thing to consider with tyres is tyre additive. Not sure how it reacts with treaded tyres like the M-Grips, but softer tyres should mean more grip.
What shell are you using? Do you have to use a Mini shell or are you allowed others? If you are allowed other shells, I would reccomend either the HPI Civic shell which is well balanced, or if you want uber-grip, the Blitz Golf GTI shell. If you are allowed different shells, I would really look to get one of these as you need to find the grip that you're losing from the tyres.
The anti-roll bar (sway bar) set is worth getting as well. Part no #54239 - I found that when everything (tyres, diff, superglue, aero from shell) was perfect, it didn't make that much difference, but when you don't have all that (tyres in your example) then it helps a lot to get rid of the nasty little things the M05 does, like snap oversteer.
You mentioned slop on the axles - don't worry about slop, the Mini seems to thrive on it - I'm not making this up, it goes better with slop, most experienced Mini guys will tell you that. I didn't shim my axles at all.
The other thing is driving styles - I found the fastest way to drive my Mini was to not brake a lot, unless it was in a straight line just before a hairpin. Just come off the gas smoothly and roll into the corner - try to get on the gas early as the car is more controllable on the throttle than it is on the brakes.
Hope this helps.
Joe
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