I put the same type of inwales on my Skerry and I cut off the tips of the bulkheads just below the inwales.  Being a "measure once and cut twice" kind of guy, I have decided I should have measured the blocking arrangement so the bulkheads terminated under one of the filler blocks in the wales.  This would have hidden the top of the bulkhead tip and made for a cleaner appearing installation. If this link works you can see the cut tips of a bulkhead and the spacer block installation process.

http://groups.yahoo.com/group/CLC_Skerry/photos/album/2049142973/pic/1706877274/view?picmode=&mode=tn&order=ordinal&start=1&count=20&dir=asc

Thanks wing,  I can't seem to get to the photos but am joing the group to get access (I hope).  I do plan to have blocks land over the bulkheads as you mention.