I believe that is the procedure for setting droop.
For setting the up-travel, which are the screws in the sway bar mounts, I use the following procedure.
I loosen the up travel screws and press the chassis flat on the set-up board. I then lift up the wheel I wish to set and using a standard height gage measure the amount of up travel on the inside of the wheel. Just to clarify slide the height gage under the wheel that is being held up, and the surface of the set-up board. By adjusting the up travel screw you change the amount the arm is allowed to lift, or travel up. There is a bit of "feel" to this method.
I started with the old JRX-S standard setting of 2mm of up travel. This is using the set-up board surface as zero which the chassis is set pressed flat to.
Obviously their are better ways of doing this. Set-up wheels would eliminate any discrepancy due to the pliability of the tires. Another method if you have blocks available of the right thickness is put them underneath the tires while the chassis is pushed flat and adjust the up travel screws and go by the feel of the chassis as it tries to rise. And of course feel free to remove the shocks based on your preference and time available.
Edit for some more clarification. Again this is for up-travel. Technically yes, droop screws adjust up-travel of the chassis from ride height. But I understand him to mean the actual up travel screws which are in the sway bar mounts which control the up-travel of the arms in relation to the chassis. For instance if we consider droop the amount of lift, or up-travel the chassis has from ride height, up travel would control the amount of drop the chassis has from ride height. So if 2mm of droop (at 4mm ride height) means that if the chassis is lifted the wheels will leave the ground at 6mm, then 2mm of up travel....er......down travel???.... would mean that if the tires were supported independitly that the chassis would dip 2mm below the zero surface of the tires contact patch, or again 6mm of chassis travel from ride height.
Basically bump stops to put it simply, and bluntly.
I mainly have found it to be a powerful tool in combating traction rolling. When the chassis rolls to much and the inside wheel begins to lift the outside is caught by the up travel screw creating a long, rigid arm that extends from the wheel contact patch to the other side of the chassis stopping a traction roll through leverage on the center of mass. I'm sure it has other uses but I am still trying to rack my brain around them. In dirt they are so much more obvious do to the huge amounts of travel and the fact that the tires leave the surface much more often.
Another use is if the chassis is "digging" in the corners. E.g. there is a bunch of tire rubber on the chassis from the chassis actually hitting the surface in a hard corner. This could be counter acted by not allowing the chassis to dip into the ground by hitting the hard stop of the up travel screws. But be warned this can sometimes cause things to be a bit erratic, at least from my experience in the the full size arena.