I'm surprised you are 5'6", riding a 50cm frame and the LBS told you that you need a shorter stem.

50cm "sounds" small, not having seen you. My thought would be that if you were short legged, long torso, you would fit a 100mm stem just fine, unless the bike has dumb geometry by having a crazy long TT. If you're long legged w/ a short torso, then your bike is too small. You would have to jack the saddle way high, then since the bike is small, the drop from saddle bars would be excessive, necessitating the need for a shorter stem, when in reality you just need a bigger bike.. like a 53cm.

Like the others have said, it's hard to say w/o seeing you on the bike, but I too have tried to fit on a little bike, and it never worked out well. No amount of stem, seatpost or saddle adjustment will make a poor fit, correct.