Thanks for the pic. You should be able to angle the outer two faucets to an angle that will allow you to use any length handle without them hitting one another. You would do this by turning them either clockwise or counter-clockwise to get them to be directly plumb. This way all the handles will run directly up. If the taps are very wide they may hit regardless. At least this is what I am seeing in the picture.
As far as function..... I'm not crazy about large tap handles. However, I have a keezer and large tap handles tend to get in the way. Pulling on a longer tap handle is somewhat easier but this only really becomes an issue if a baby is pulling pints off your kegerator. I'm guessing this isn't the case. I believe most bars simply use long tap handles because the brewery wants them to stand up high so customers can see them across the room. This is the only advantage I can see with them. I would go with whatever length you deem necessary for how you want the handles to look or the design you are after. From the picture I see the length should not cause them to hit each other.