If I remember right, I lapped the glass about four inches up the bow and transom.  Made sense to me as it should add lots of strength to those critical areas.  I also lapped the glass over the bow and transom on the outside.  Jer  http://gallery.me.com/jermcmanus

Those transoms get beat up.  We drove a forklift through our showroom model's bow transom once.  And I sometimes brought the Folkboat home by lashing my Eastport Pram to the stern cleat, setting the autopilot, and rowing hard.  

 I always try to lap the 'glass onto the fillets if possible.