I've asked for some help from a someone with perhaps more expertise than I have, but in the interim...
I've found that joining paired ends sometimes makes mistakes, and if E coli is (say) 300 nt between your primers, and you join 2 paired ends and get something 150nt or 500 nt long, it's probably not a cool new 16S: it's probably a mistake in joining paired ends. So, I'm a fan of some rough cutoffs.
Then, OTU picking will match each sequence against another sequence, and roughly estimate the 97% similarity for the length of the smaller seq. Reference seqs are often much longer than our illumina amplicons. So each sequences in an OTU will be similar to the reference seq (or the 'seed' sequence if it's a de novo OTU), but not necessarily as similar to any other sequence in that OTU. At least I'm about 80% sure of that last sentence.
In any case, OTU clustering with different length is generally ok.