Repotting? Now what?

[AndreaK]

I wanted to repot my Phrag. (Belle Hogue Point? - mislabeled as Eric Young) into s/h. It has been growing in moss which I keep consistently moist. My problem is how do I go about that when the root system is 3 feet long? There has obviously been some damage done to the roots trying to untangle them and remove the media clinging to them.
Should I cut them, leave them, or thin them out some? Should I soak in Physan before repotting for any breakage? Also what size pot should I use (I only have quart sized deli containers which I have been using thus far and I know they are too small)? I have switched some plants over to PrimeAgra using MSU fertilizer for r/o water and have been supplementing with Kelpmax. What depth should I plant it, to the base of the newest growth? You can see in the picture, the roots on the newer growths have seemed to stall and not enter into the pot. I tried to mound moss up around them but they did not seem to like it much and seemed to fail to grow.

Or should I just repot into moss again?