definitely get a smaller frame. that one has a relaxed seat tube, so a lower-offset seatpost and/or moving the saddle forward shouldn't put you in too much danger (as long as your KOPS is about right, as 128 explained).

ultimately saddle height and position should be determined by your body from the hips down, and your handlebar setup by your torso, arms, and hands. you shouldn't correct a too-large frame with a short stem except temporarily; likewise you shouldn't make a small frame 'fit' with a ridiculous seatpost and bullhorns on a 140mm stem.