Skeeter,
Paul here, with the red craftsman.
yes the tires are 16-7.5-8 on a 8x8 rim.
The pic you have your axle marked on the side is exactly where I put mine. But I measured with 16-6.5 tires then switched to the 7.5's after I got it built. Thought they looked better on the 8 inch rim. But I got lucky and they fit----barely, I had to roll the lip on the fender under so it wouldn't cut the tire.
My advice is to get your tires mounted and put your axle together and measure from there. You are right you will never get 4 inches ground clearance with that mower with those tires. You can't modify the fenders, only move them discreetly, which I did. I jacked the fenders up in the back about 1/4 inch this made a big difference on ride hight. But you need to have the tires mounted so you know what shape they will be. Hope this helps