Yea it should be fine, I think Fluval always says that. They say either too short, or too long, and they also say has to be below it (as most canisters are "gravity driven"). I just set up my Fluval G3 6 inches away from my tank which is not underneath it and it works.
As for what's in it, yes throw away the carbon and if there's extra room then put more biological filtration in there. Stuff like Fluval's G-Nodes or Eheim's ceramic balls are good. I also place a pre-filter on the intake so that can absorb most of the stuff and not clog the mechanical filtration of the canister filter (it's a lot easier to just clean the pre-filter than take apart the canister filter and clean that)