The nice thing about the Xtreme 2 is the fact that you do not need to change cables for different exercises, but it does mean numerous cable position adjustments depending on the exercise you are doing.
To alleviate the slack problem in the cables you can either have the cables that run under the seat remain attached to the leg extension attachment or move the sliders attached to those cables as far forward as possible thereby pulling the cables as far out as they can go. This will both increase the resistance provided by the rods and keep the floating pulleys from hitting the lat pulley housing.