Hello,
My preferred way to use condensing is like the attached picture. Is there any way to toggle something for the condensing labels (the 2s and 3s, etc.) like avoid collisions so I do not have to manually move every staff? I end up manually moving every label, to a spot I want it - that part is fine. But, I wish that when I moved it, it did not keep the extra staff spacing gap the labels are forcibly creating.
I don’t there is an easier way around this currently, unfortunately.
It feels like there should be something as simple as an “avoid collisions” button I could tick in properties 
I haven’t tested it but it would be in Engrave mode if there is. I don’t think it’s possible though.
One way to avoid having to move staves manually is to hide the condensing labels which push the staves apart and replace them with staff-attached text using the Player Labels paragraph style and with collision avoidance disabled.
You could try adjusting the Engraving Options for the horizontal offset, and push condensing labels further to the left (allowing them to sit e.g. left of the barline, closer to the staff).
This would affect all condensing labels in the project, though, so may or may not improve the outlook of the project overall.
That’s what I do and it works pretty well
