Woo hoo, some confused concepts here!
Ride height is affected by the "preload" adjuster (big black dial on the left), by spring sag and by front fork location. Spring sag increases with age and usage, so although 7k isn't much mileage, 8 years is quite a long time if the bike is usually parked on the side stand. A low ride height will make it difficult to get the bike onto the centre stand. Before shelling out several hundred quid try just increasing the pre-load. Ignore the "factory setting" 'cos it's an oldish bike. Set it to the right height for you.
Also double check if the front fork triple-clamps have been dropped down the fork legs. That will lower the overall ride height. If you like a lower ride then leave it; if you'd like it higher then raise the triple clamps (on the centre stand, one side at a time and with a mate on hand to help!!!)
(There are two main reasons for replacing a rear shock. Usually it's to do with leaking dampers which causes the bike to bounce after a bump, as Jackdaw says. The reason your mechanic is giving has nothing to do with this. The second reason is if the spring has sagged.)
Damping doesn't affect ride height when stationary, so ignore this for now. I think V2s didn't have any adjustment anyway. (Later Varas have rebound adjustment only. Reducing rebound adjustment will increase the feeling that the tail is kicking up after a bump; increasing it may make the rear squat down over a long bumpy section making it less compliant.)



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