Depending on the frag, I do either. I haven't found the coral growth affected by leaving it on the plug when I mount it to the rock. Nor have I found it distracting when the coral grows over and off the plug onto the rock - it blends in pretty well. There is the challenge of "fitting" the plug, or even the frag at times, to the desired location, and that can take some finagling around. Whichever approach I use, I try to save as much of the original frag as possible. If I end up removing the frag from the plug it has already encrusted, I tend to re-grow a new frag on the old plug from the remaining chips.
Hope this helps.
Cheers,
Ray