First, when you say 1-2' rock hops, does this mean you are doing up to 2' drops? If so, it is not surprising that your shock is using all of its travel on a bike like that. That is OK, as long as it is not bottoming harshly. Also, how much sag are you running? I don't believe in being too tied to sag numbers, but it is a good starting point.

As far as the roughness goes, How do you have the compression set? If I remember CTD correctly, doesn't it allow you to fine tune the "trail" setting? I would try the descent mode and see if it feels smoother. Then at least you will know if the compression damping is the issue.

This is the best guide I have seen for setting rebound adjustment: