I shorten my t-shirts all the time. After determining where I want the hem to be, I add 2" to that. I turn under 1/2", then turn 1 1/2" and stitch very close to the edge. This gives the hem some body so that it wont roll as with a smaller hem.
Good advise on the stretch slightly when stitching. Since the t-shirt will stretch when you are wearing it, you need to allow for that stretch or the stitches will break.
Use a ball-point needle or a microtex needle when you sew it. It will be less likely to break the fibers of the knit in the t'shirt.
M