I remember reading a little bit ago,but now I cannot find where it was Someone asked what was the best way to cut the kickdown and shifter linkage cables if it was too long instead of rolling it up?
This is not meant to be a smart a$$ answer - the best way to cut the cable and housing to shorten it is with a cable cutter. They have special jaws that are hardened and contoured so that the cut is clean without fraying the ends. Just draw the cable flush with the end that you are going to cut off and cut the housing as short as you need it. It will cut the cable and housing in one stroke and when you extend the cable again it will extend as far as it did before beyond the sheath.
I think a Dremmel tool with a cutoff wheel will do the job also. Just wrap the cable with a layer of tape prior to cutting.
I encountered this problem recently with cutting braided stainless hose. The cable cutter tool works much better. The dremel will create heat which warps the tape, causing it to flare out a little. The best I have found so far is to invest in cable cutters from Home Depot, Lowes, etc for about $12, and wrap 2-3 layers of electrical tape around the hose/cable. Cut right through the middle of the taped area.