In our machinery installations, the sleeve is used to keep the stud free from the concrete block and the grout. Once the base is installed and grouted in, the sleeve does not see any loads. So, for our installations, we really don't care how much clearance there is between the sleeve and the stud, as long as the stud is free to stretch. I would base the length of the sleeve on the diameter of the stud rather than the amount embedded. As I noted before, for general purpose machinery (such as FD / ID fans) would want a sleeve length of 5 stud diameters. So, for a 7/8" stud, I would want a sleeve at least 4-3/8" long. I am not an expert on the proper amount of embedment as this depends on the style of stud, the grade of concrete and whether the stud is connected to the rebar in the foundation block. I will leave questions of embedment to those with expertise in that area.
If you are referring to a sleeve that is above the base plate to provide the free length of stud above the surface of the block, I will also have to defer to other experts. This would place the sleeve in compression making the size of the sleeve important.
Johnny Pellin