Take a look at the EXO guys, AZRR, etc, they’re abusing Gen 3 35 trucks on 37s in Baja without issue. Last time I was down there Baja was a bit more rough than Costco, but not sure, they have been on a development kick in CSL lately.You are 100% correct. If all you do with your 37" tires is Costco runs, you absolutely don't need the benefit of the larger shock.
I doubt King has done the same amount of R&D when it comes to shock development specifically for the Raptor and it's intended use. I wouldn't switch my OEM Fox for Kings if doing Baja runs. That's just me.
They all did the same with the Gen 2 too before 37pp’s existed. Same deal.