In my humble opinion and having used the rig a fair bit and asked myself the same questions-
The lower bead should be far enough away from the lead to stop the hook touching it and risk blunting
I try and fish the top bead at the depth of any weed, or if its free of "vertical" weed, maybe 1 - 2 feet apart
I try and fish the line "straight" by which I mean not tight, but not slack enough that its as direct to the bait as possible. I like the line as close to the bottom as possible, and fish it "naked" rather than with a leader. I think a chod fished on a tight line risks the bait hanging in the water and looks wrong, particularly at shortish range
I'm sure there are occasions when a fish swims towards me with the bait, but I'm not worried about losing any sensitivity or indication, particularly if the line is "straight" as I described. There's a lot on this forum from some good anglers about line movement in water- it moves very differently to how it would in the air.
I reserve the right to be totally wrong, but it's how I do it and I'm very confident with it.
What sort of venue are you fishing? I'd be interested to know how you get on