Yes, this is an issue with "traditional size" prefolds and a big reason the sized ones are more popular. The prefolds I trifold in M's size 2 Thirsties covers are GMD Medium (red edge), 15-16" long and fit perfectly at the unsnapped rise setting, they are designed to fit in most medium or large covers. I think they are like 3-4" shorter than most premiums. If you want to hide the extra bulk you can try folding, it helps pull some of the length out, but it sounds like you are doing a lot of foldover so that might not work. Probably the best option is to trim them like you mentioned. If you have a serger that is ideal. You want to make sure they are very very soundly sewn up and durable.
Most people do need to size up on pants to cover a fluffy cloth butt... though if you trim the prefolds it should help the pants fit.
I would not worry about the car seat. The cotton diaper material is really not compressible. It is not like the puffy winter coats or anything. Just adjust the straps to fit in whatever outfit and diaper he is in, like you normally would. As long as it is all well adjusted so the chest/shoulder straps are nice and tight and the chest clip is up high, he is not going anywhere