Steve,
The reason I asked the height difference is the turbulence from the first rotor to the second one. This turbulence has a negative effect on the sesond rotors lift with high angles of attack. I tried to explain the problem in the picture attached. This is the same reason, why in Rutans Quickies rear wing is much higher than the first one.
Rutan's Quickie
I am trying to imagine the lift situation with two counter rotating rigid heads. For me it would be almost the same to make rigid or flapping heads as I have a access to CNC-machine.
I still haven's started building my other twin rotor autogyro. I might build this one instead of the original idea. The blades (6* 33cm) are already made.