They Are Only About 2-3" Tall. In A 5-1-1 Medium. NOT overwatering.

I'd transplant them into some bigger cups. I think the majority of what some people use are what? 18 oz or so? I just take a dremel tool and drill bit extension for it and pop 4 or 5 holes in the bottom really quickly. It probably isn't bad, I'd just re-pot them though if roots have made their way out. Plant doesn't seem to mind it from the looks though.

To do what you're trying to accomplish, you need a way to elevate the inner cup. You can place something in the bottom of the outer cup, or wedge something in between them at the top end. But, it's just sitting in a puddle of water at this point.

I'm not sure what the best thing to do about the roots is at this point, so I'll let others chime in on that.

Though, I don't think that plant looks too big for the 12 oz cup. Many do use 16 ones, though. I just don't think it's an issue yet.

I wouldn't think it sitting in water is really "bad." The plant doesn't look too stressed though.. I know if it were me, I'd move it over into a little bigger cup, and let it be done.

Don't know what to do about the root though. Part of me wants to say pinch it off? But I'm not sure if that would stunt the plant? I know they can survive quite a bit, though. But for the roots to have actively made their way down there, could it be possibly getting too dry? I've not had any issues with roots finding their way out of anything yet out of 300+ plants.

Hope someone can chime in on what to do with it! I'm curious now too lol.

I've Read Over And Over Not To Over Water And I Took That Advice Seriously. I Check With The Dowel Method almost Daily And The Bottom Half Inch Of The Dowel Is Usually Damp, So I Have Been Bottom Watering About An Inch Of Water About Weekly. Too Little Water, You Think? I'm Not Sure.

Perhaps I should move them into the outer cups that have no drainage holes? I would, of course, be extra careful with watering so that I don't have the roots sitting in the bottom of the cup in a ton of water.

Unsure. I like the idea of any excess water be drained off. I just water mine when they need it, and don't go on any schedule, or any precise measurements. The ones in my solo cups I have sitting in some cat litter boxes that I bought at dollar store. They are the perfect thing to put a bunch in and move around. But I water from the top in those, and any extra water drains right into the bottom. I tried doing everything one specific way, and measuring out etc etc. but with 300+ plants including tomatoes, it can start to take an obscene amount of time to water things.

Water when the plant needs it, regardless of time-frame, and re-pot when roots outgrow their growing area is what I do. Though I'm not moving anything else out and will have to be a little rootbound at this point in time. If the weather keeps up how it is, I should be able to sit things out by the middle of this month. Time will tell!

The root is fine, but the fact of water sitting in the under cup is more of a problem. You're skirting close to too much water; after you've watered and let the plants sit for a couple of minutes dump out ant excess water.

so here's what I did..... I tucked the roots back up inside the holes as best as I could and from now on I'm only going to top water and I'm going to water sparingly as well.

Thank You For Your Comments, Everyone.

Here's what i am doing in a similar situation as yours: i put a wick through a hole in the cup, and now i water from below. or in your case you'd put some gravel in the bottom cup to keep the other one up, while the wick will take water upwards without problem, even in 511. Just one detail, don't push the wick in only to the bottom of the cup, try to get it to half the cup's height. It's easy to do, i use a barbecue skewer and just gently push it in, although i've added wicks to most of my cups from the start now.
There are pics in the picture thread with this system, i'll post here as soon as i get to my computer.