You measure it with the springs out. So the exact size of the springs is important, as they change the level when put back in. So you want to use Progressives recommendation instead of what people do when they use other springs. As well as using Progressives recommendation for which end of the spring is up, that also changes things slightly.
Keep in mind why it matters. What we are really concerned with is the amount of atmosphere trapped above the fork oil. The oil does not compress, the atmosphere does. Too little oil = too much atmosphere and yields too much compressibility and too little compression dampening and a mushy imprecise suspension (dampeing for compression is also influenced by the cartridge design and damper rod physics, but the atmosphere compressibility is an important factor). Too much oil = too little atmosphere and yields too much resistance to compression and a rough ride.
Then consider that very small changes in residual trapped atmosphere makes large changes in ride. When I did the Progressive front springs I used medium Shock Therapy oil and followed Progressive's 5.5" recommendation which I found to be just a little too soft for my taste, so I added oil to reach 5.25" (you gotta clean all oil off the springs before replacing) and it was just right. Only a quarter inch! Fred got that one right.