Ben,
You grasped it correctly. The way the body fits over the wheels, with the normal axle width and prescribed backspace, the outer diameter/edge of the rear tire is inside the lip of the wheel well. At full axle compression and/or articulation, it rubs inside the body about 2" up on the inner fender.
You need to be real careful with any changes to axle width, tire & wheel size and backspace since you could make the tire come in contact with the lip of the fender when the design calls for it to be out of the way during this movement. You could have to set your ride height so high, it looks like a mud truck.
In the past, other guys who have played with these settings, would make a template that looked like a reverse "P" placing the straight part against the axle/wheel flange then rotate it with the axle in the full down position to see if any of the "curved part of the P" hit the fender
Paul