Hello!
You will want the water level to be just below or at the line shown below. I have found this to be the best level for performance.
Concerning the bubbles, that is a personal choice as some like to skim wet or dry. I like to skim a little on the wetter side.
I would remove the skimmer cup and then power up the skimmer. Adjust the valve until the bubbles are slightly pouring over. Then attach the cup and let is run for a day. After which, if there is not enough skimmate being pulled you can adjust the value to open or close, increasing or decreasing the level of water in the skimmer.
It'll likely take you a few days to dial it in properly but once set, you really wont have to mess with it again. Mine has been set at its current setting for over a year now with no adjustments.
After a year of operation I can say that this skimmer is flawless, worry free, and does a fantastic job. I am not sponsored in anyway with the skimmer. I am just a happy customer sharing my experiences.