Definately lengthen, I did the same with my roadhouse strat, and you need to lengthen the strings. Remeber, the shorter the string, the sharper the note, longer string, flatter note. A good way to intonate is use a tuner, tune the strings, lengthen a bit, tune the string, play a high fret into the tuner on each strings (such as 12th fret) and if it is sharp, it needs more lenght, if flat, it needs to be shortened. After each adjustment, re-tune, play a high fret, adjust, etc.
It may seem annoying at first, but it really goes by quickly once you get good at it, and with heavy gauge strings it may be hard to lengthen sometimes with the pull off the strings, so you may need to flatten before adjusting. Pain in the ass, but it'll pay off
Good luck,
Matt