99 FE400E CAN I LOWER THE SEAT HEIGHT?

Can be done, yes.

The rear shock spring and internals can be lowered - the spring cut to shorten it and then (as far as I know) a travel limiting spacer is installed. This is how I understand it - haven't done it myself. (Note that when you cut the spring, you make it stiffer.) This is considered the proper way to do it.

Then you can of course - can!, not necessarily should - simply add rear preload to drop the rear. This will lower it but it may induce heavier steering (aka stabilize the bike) - and can give you a rear suspension that isn't working to spec. I actually have my DR-Z set up outside of the recommended sag range just to stabilize the bike and it's not at all that bad dropped a little. I'd try it, but try it before and after to get a feel for whether the handling quality degrades noticeably.

Then just to name something else, on DR-Z's it's popular to just shave a bit off the seat foam - i.e. lower the seat itself. Not sure if the 'Berg seats are good for this but it might be something.

Anthon Berg said:

Then you can of course - can!, not necessarily should - simply add rear preload to drop the rear. This will lower it but it may induce heavier steering (aka stabilize the bike) - and can give you a rear suspension that isn't working to spec. I actually have my DR-Z set up outside of the recommended sag range just to stabilize the bike and it's not at all that bad dropped a little. I'd try it, but try it before and after to get a feel for whether the handling quality degrades noticeably.

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You really mean 'decrease the spring preload to drop the rear'. This can be balanced out by raising the fork tubes in the triple clamps a little to lower the front end.