Keith,
As Jeremiah and perhaps others have said, I have had my share of issues with ISO mounts. I'll have to defer to the others on the one to two threads showing above the top of the lock nut. However, I do caution you to check to see if those bolts will turn in their holes, once that heavy 16 horsepower engine is mounted on, and bolted to, the engine cradle.
If those bolts turn at all with the fingers, they are too loose, and you will experience excessive vibration when the tractor is running. Loose bolts were causing all kinds of vibration, concern and confusion on my 1250. When I discovered that the ISO mounts were too loose, and tightened them so that they had just a bit of compression, my vibration issues were curtailed.
Thus, from my experience, the one to two thread rule is a good starting point, but it isn't necessarily the end-all of rules. It will take some experimentation to get your ISO mounts set to your tractor.
I wish you all the best on this project.