I'm very aware of the artificial means to give shorter people an advantage, known as weight classes. I'm of the opinion you should compete where you're strongest - eat, get big, get strong, keep getting stronger, when you're more experienced you'll find what weight class is appropriate for you. A 5' 8" powerlifter will be at his best in the 242lb or higher weight classes(but most people don't reach this level of advancement). Ed Coan(the most successful powerlifter in the history of the sport) was 5' 6" and 242lbs and squatted over 1000lbs in equipment that would make modern powerlifters laugh(he was also a genetic freak and deadlifted 791 @177lbs(just barely missed the weigh in for 165, had to compete in the 181 class), which implies the average man will need to be bigger to approach his #s, if it's in the cards for him at all). Donny Shankle is around 230lbs and clean and jerks 400-something at 6' 0", he placed something like #24 in his weight class at the olympics(weightlifting is a sport the U.S. is notoriously undedicated to). He clearly needs to get bigger and stronger and lift with the superheavyweights. He'll never be competitive at the olympics at his height and current bw.
If you're looking for fighters, check out
http://en.wikipedia.org/wiki/Aleksandr_Karelin - largely considered the greatest greco roman wrestler of all time, and the guy was a horror to behold, check him out on youtube. Imagine one 300lb guy picking up and tossing another 300lb guy to the ground. Yeah.
Yes, 3-4lbs per inch of height is a good place to be for athletes. The goal is obviously not to get fat - it's to get big and therefore strong, or rather strong and therefore big. Some fat gain will be a consequence however, if you're already low body fat. If you're fat, a correct program should have you losing fat and weight for a while, and then start gaining overall weight while you continue to lose fat until you're in a normal range, of say 10-20%. 10% or lower is too low to sustain an anabolic enviroment, and over 20% is starting to approach unnecessary levels of fat.
It seems the guys that are scared to gain weight are confused bodybuilders at heart. Even bodybuilders get big and strong first, and worry about their abs later. Only with drugs is it possible to keep your abs while getting considerably stronger(and therefore bigger). Unfortunately, the modern "bodybuilding" community is full of "men" who think that if they try to look like Jane then will end up looking like Tarzan.