Looks to me like it's barely poking into the engine compartment.
Not based on the thickness and size of the landing gear struts. The solid supports on either side of the landing gear pivot directly up into the lower pod. They would extend into at least the lower 1/3 of the pod when retracted.


I also don't know why you'd assume it is running on hydraulics. It looks to me like an upper and lower pair of gears at the two pivot points, and it doesn't appear the assembly would retract any more than the diameter of those gears, if that, and they could potentially be cradled around the sides of the lower thruster.
It would likely be a hydraulic pivot given the massive amount of forces required to support the ship's weight. Here's a google search of what that looks like:

On the topic of what the "intakes" do on the engine pods, in addition to any possible intake/scoop function they are fully functional retrothrusters as seen here when the Chieftan is decelerating:

Interestingly enough on the Krait we have obvious intakes mounted on the top of the engines which clearly do not fire as retrothrusters. This tells us that the ship engines are designed with some sort of scoop/intake function that has no direct role as a retrothruster assembly:

And in case anyone was wondering what use a space craft would have for an intake, here's the relevant section from the Colonial Marines Technical Manual describing the function of the engines on the Sulaco's dropship:
