Personal choice. Some people like the in the boat feeling, others like the up high and dry feeling. Sitting lower gives you more balance, as you're more stable - lower centre of gravity. But you have slightly less control over your edges and a little less power in your strokes. Paddlers who sit higher (some playboaters sit VERY high) have more control over their edges, and have a bit more power. Sprint boaters have very high seats too, you know, those K1 boats used to race 500m, 1000m etc. in the Olympics.
Sit upright. If your elbows are hitting the sidewalls on the boat, you're quite low, but that's fine. Remember this is a personal choice. If you're elbows are just hitting the cockpit, that's also cool, probably quite good. Just clearing is getting higher but probably ideal in my opinion... You also won't smack your elbows as much on the boat this way.
Try it, you might like it. But try it a few times on an easy river, takes getting used to. If your elbows clear by like an inch or more, you're getting high. Some people put a 1 or even 2 inch or more (sorry, didn't check if you're from USA from assuming) under their seats. This is high. My advice, put a piece of foam in (don't glue it in) and see how it feels. Seat height plays a very important role, as does body position. The forward, backward, neutral positions which need to be adapted during different transition, or when doing certain things. I think you only meant height, not sure