Bike fit / correct riding position

It's a layback already. Hmm... perhaps change it for something with a lot more layback? Would be cheaper than a new frame. But where would I find that?

The plum line advice I am referring to is from 1:11 into this video
.

Oh, and Smallfurry... how much longer should my stem be?

From what I've read, knee over pedal spindle has been discredited, in a way. However, it seems to be a good starting point, especially for a traditional roadie geometry bike. Yours being quite short in the top tube or steep in the seat tube for a more upright position might mean KOPS is irrelevant. I'm not an expert. Have a search for knee plumb line and most things point to it being from below the kneecap.

Thing is though, I'm sort of putting that out there just to make you less worried about the plumb line test you tried. They might both be bollocks (or at least not relevant for you) so I wouldn't worry too much either way. Main thing is if you're feeling too squished cockpit-wise but that your legs feel ok, is not to move your saddle back to sort out your reach. Order of sorting things: Feet (cleats), arse (saddle height and fore/aft) then hands (bar height, reach, angle).