My brother got a 99 700 SKS with a 136x1.25" track on it. It might be a 1.5", but I didn't measure. The track rubs like crazy, looks like at the back of the tunnel, well before you should be bottoming out. Looking at the rear skid, Xtra-10, nothing looks out of place. The RRSS is not taken out like some do, it is on high, in the front hole IIRC. There is a lower mounting hole on the mounting bracket for the rear torque arm. I'm thinking the rear susp. should be in the lower hole; is there anything else I should be changing at the same time?

I run a 1.75" in my SKS with no problems. The only thing I did was mount the skid in the lower holes where it bolts to the tunnel.

Make sure clean up and rough spots on the track lugs. If the lugs are torn or damaged, I suggest something like a dremel to take away the damaged portion, it's the same effect as stop drilling a crack to prevent further spreading. I believe the stock tracks on the sks is a 1.5. Go down to the lower hole in the rear. Is there any sign of rubbing the front of the tunnel? If there is at all, make sure the drivers are the correct size. Would hate to see a perfectly fine track go down the drain along with the$. Do you know how good the shocks are? Have they been replaced or serviced recently?