The performance you gain or lose is determined by a lot of factors. Motor height, like you mentioned, is one but so is the distance from of the nose of the gear case measured to the very back of the bottom of the boat, the pitch/diameter/make of the prop, water and air temperature, and a handful of other things. Seriously, an entire book can be written about it.
For the sake of taking a guess (and this is assuming that your in-laws are running the exact same boat with the exact same motor with the exact same prop as you; basically all measurements are the same with the exception on engine height) then I would say that lowering the engine would keep their boat from blowing out so much.
However, lowering the engine one hole is normally about a 3/4" adjustment. In most cases, a 1/4"-1/2" adjustment makes a significant difference in performance. It's entirely possible that lowering in just one hole will make it lose a lot of speed and possibly handle worse at top speed.
Is it possible that your in-laws carry more weight in the nose of the boat than you do? That is something that can greatly affect the top speed and contributes to blow out early into a trim cycle.