Been doing a bit on reading on suspension and the importance of a good setup. Here's the best article I found explaining the importance of preload and the difference between spring rate and sag. 

http://fixbroke.tumblr.com/post/39188918110/spring-preload-and-sag-what-does-it-really-do

 

Cheers

Art

Nice find! This is some of the logic I use when setting up suspension. My experience comes from drag racing where very minor adjustments means the car either goes straight or hits the wall! There isn't many people around that understand or even care how important properly set suspension is. Getting it right will not only be much safer but will also all you to enjoy your pride and joy so much more. There was a guy on here not too long ago who decided to have a go at it himself, his approch was not only too aggressive but he ignored everything we here were trying to tell him. In the end he was still very unhappy with HIS setup and sold his bike because he couldn't get the ride he wanted!

T1

I understood everything the article said (I think), but it did not have recommendation about bike setting. My XL883C with OEM suspension is set on the mid (of 5) preload setting of rear suspension and occasionally bottoms out on a big bump. So, should I set it to a tighter preload?

Preload will only help with travel length, reducing your sag could help but it may be that you may need a higher spring rate or more dampening. 

Bottom line it may help  to increase the preload but don't set it so there is no sag when you sit on the bike as you will introduce a whole new set of problems. You want it compresss when you sit on the bike, try 4 and see how you find it.