Long time, no see. So I'm still in the process of writing a rough draft/first draft. It is now 75k, though I have been slacking off lately. I have a scene where a man is telling a girl a story that is central to the plot. Right now, it is over twenty-five pages (about 8k), and I'm not finished. How long (or short) should a story within a story be? I feel like at this point, this book has so much material and plot that it needs to be cut in half. I feel as though I am rushing through it, the characters and setting are underdeveloped, but I don't wish to sacrifice the plot either. Any advice?
Best thing to do is complete the first draft and then edit it for content and size. My new novel's first draft is going to be around 130-135k, but I'll end up chopping at least 20% off that...so it'll be a nice sized book when hitting for additional editing.
You may have a story within a story, but ultimately, it must be one story. Either the outer story provides a contect for the dominant inner story, or the inner story reinforces or adds meaning to the dominant outer story. From that point on, remove anything that does not contribute materially to THE story you are telling. The relative lengths will sort themselves out as a result.