I've only skimmed over the replies, so pardon if this is redundant. For most dicotyledon seedlings, you can transplant them deeper to right below their cotyledons (or cotyledon leaf-scar if they've dropped.) However, you do want to give the cotyledons enough space that they don't lie on the soil and potentially rot from excess moisture. If you think about it, the hypocotyl is designed to be both an above-ground and a below-ground structure. The percentage of the hypocotyl that is devoted to one or the other will depend on the circumstances that the particular seedling encounters. My experience has been that the hypocotyl quickly adapts when those circumstances change (such as when I plant them deeper.)