It should be in a section of the sump where the water height doesn't change (so anywhere except in with the return pump). So, no changing height required.
You ideally want as much air as possible, then adjust the height, and tweak the air input to get it just right.
The foam should just overflow the top and pop in the collection cup.
There should be enough waste to keep the skimmer busy if you feed normally. It will spike from time to time with some foods, and sometimes for unknown reasons (everyone seems to get a crazy skimmer from time to time).