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On fly sizes 16 and smaller, Gary Borger factors in the length of the hook eye as part of the insect length. Gary specifically discusses the hook eye in Designing Trout Flies pp. 178 :

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Good thought on the turle knot. Also kudos for not calling it the turtle knot. I wonder if tying the knot in reverse on a down eye hook would also work. I would think so but have never tried it.
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You can modify those small gape hooks by offsetting the point. This exposes the point when the fishes mouth flattens the fly.


When you try this on a fly that is already tied, you risk breaking...

These are a couple of "old wive's tales". They have been repeated so much that we believe them without thinking about them. Modern fly fishing books have corrected the error, although the Mustad site...