Technically, the outlet tube should be sitting just above the water line. I would DEFINATELY switch to some king of gate valve since that outlet is flexible. It's a huge pain.
Also, If you're going with a stock pump, you're going to have to cut that tubing and raise the pump up quite a bit as it doesn't draw nearly enough air.
This is for glen, right?
It's not going to matter as much on how high the water level is on the base but more on the pump. IMO it should be approx. 2-3 inches below the water line.