What effect does the rear wing side dams do? What would cutting them lower do?

They do a couple things that I can think of... maybe more.

1. They keep the air flowing over the wing. Going straight over the wing instead of "falling" over the sides and not providing the downforce the wing is capable of.

2. They also provide a bit of stability around corners and down a straight. This would depend on how big they are. And it is probably minimal since they are not very large.

You have probably seen the huge side dams on the outlaw sprint cars. They are very effective in keeping the car on it's wheels when cornering. Amongst other things.

I would not cut them.

In stock on a high bite track, i always run small side dams.. You will see alot of guys at big races in stock class run no wings.. There fast to.. this is for carpet tho.. I always prefer a wing, but a smaller one..