Cory,
You can manually modify the gcode by removing each of the Z retract lines, thus it would finish one pass and then just plunge down for the next ( which i don't recommend ) or maybe modify each such that the Z retract is smaller, but,that's still manually changing the code.
The reason you are retracting the Z is to allow coolant to flush out chips from the cutter and groove.
I fooled with tool and cut depth settings but couldn't find something that would incrementally change the retract.
Maybe "Chip" has something in his bag of tricks as he is more versed in LazyCam than i am.
RICH