I can do the offbeat "1 and 2 and 3 and 4" rhythm well, but when you watch and read lessons on reggae guitar (not to mention listen to the music) you notice a very common strumming technique which is like a note that sounds like you are playing it but also sounds slightly muted. The best explanation I've found for how to do this is to lift your fingers a couple millimeters above the fretboard when playing the note. Yet when I do so much as lift my fingers AT ALL the chord just sounds dead and ugly. How do I make the reggae chords sound like that half palm muted but still very alive note like you hear all around?
Try playing triads on the bottom three strings and only muting the note on the b string at the neck not at the bridge like a palm mute, idk if you tried that already but it should work and then if you can get a bass note in their it sounds good
you fret down quite lightly and mute with your fretting hand almost instantly. Lots of dead string playing like you would in funk, just a lot more chill and based on the drag triplet.
i do a down stroke on the down beat muting all the strings with my fretting hand.

then an do an up stroke on the up beat while very lightly fretting the chord
I just lightly (and I mean lightly) palm mute while strumming. As someone already said though, also fret lightly and lift up from the fret board quickly to give that staccato sound.
But how do I lightly fret? If i do it anything other than completely fretted its dead.