If you follow the Honda WS manual then it is springs out ..... but of course so many of us have changed the springs (a lot use longer springs) so the air gap only applies to OE springs.I presume this is calculated with forks assembled, springs in?
I run 110mm with my cartridges so 120 might or might not work for you.Does 120mm gap sound like it might turn the fork overly stiff? Coming from 142 to 120, seems like a proper decrease. Plus the springs are stiff as is already.
I bought Motul's Fork Oil Expert 5W for this, around 18 cSt.