Do I need to cut this shop vac hose adapter when I use it?
Yes you are supposed to cut this at the point which gives you the correct diameter.

Collecting dust from tools requires large amounts of airflow (cfm) and static pressures can be very low and still effective. In your case, you will have high pressure but low airflow due to that restriction. 

Also helps to ensure there are minimum bends and turns in your hose and keep the hose as short as possible.