the saddle is a 17 inch, and I think you may be right that 17.5 would be better. Tiny, I often have my heels up like that, I do not believe it is pinching with my knees but rather my awkward attempt to get my legs on. I do not have this problem when jumping or doing flat work in my close contact saddle. In fact I am regularly complimented on my low heels and good posture when riding in my hunter jumper gear.
Yesterday I rode in the Warendorf and really focused on heels down, chest up. my friend was there and was amazed at how much better my leg was and my horse was wonderful.
Today I had a dressage lesson and my trainer really liked the balance of the Warendorf saddle but thought the tree was too wide for my horse. She thought my position much, much improved (yay, at least on track there!). Halfway through the lesson (after cantering as usual) my horse started to get worked up and tightened his neck and shortened his stride. My trainer thought that before he lost it we should try her medium tree saddle on for fun. It definitely fit better in the tree but was tilted backward (much more than the Warendorf). None the less I climbed on as my hot horse started to prance to spin in circles, ready for the rodeo. We took off and after three strides...magic. Like hands down different horse. I put my legs on, he turned his ears to me, his stride lengthened by like a foot, he became rhythmic and began to stretch through his neck. I literally have never experienced that with this horse. He was like a sports car on the bit and smoothly going wherever I placed him. I asked my trainer about my leg (concerned about the balance in the saddle) and she said it was perfect (was not even trying).
Anyway, the saddle I rode in was a PDS Monoflap. I think the monoflap may have been the difference. I am not sure but I have never experienced a transformation in a horse to that extent, ever (I have rode consistently with different trainers and in different disciplines my whole life). I am now desperately trying to find a used monoflap saddle for a low price on ebay so if anyone would like to donate or sell me one that would be fantastic ;)
Wanted to share for others with saddle trouble - a saddle can make a bigger difference than I ever imagined.