#2
On a Floyd? Basically as low as it can go. You definitely want it to be low enough so that the strings are held down against slots in the nut properly.
#3
You want to set it as high as you can while its still does its job, it should only be there to keep the stings in their nut slots.

Set it too low and you add a kink to the string which will prevent the string from moving freely making tuning less stable and less accurate.
ESP M-1 - Dimarzio Super3
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