I added an extended mag release from Brownell's (Ed Brown) and it looks at least 1/8" lower than yours. Mine has no issues with any of the three kydex holsters I use - Bladetech, Solely Canadian and Fobus. Do you know how much clearance you need? As others have suggested dremel'ing a notch should do the trick without affecting retention. If you don't feel like grinding away on your holster then perhaps changing to a different extended mag release will help.
I also found that using the extended mag release uncovered a grip problem I had that caused me to drop mags because my support hand palm swept the release. Indexing my grip properly solved it but took several days/weeks of work and it still happens when I get tired/sloppy.
