Transducer under the ice
I also usually drill a separate locator hole, but with this method you really don't need to because it's not really in the way.
As the one gent mentioned, 'The transducer needs to be hanging straight.'
Like another gent mentioned, I always drill a separate hole for the Flasher. It eliminates the tangles with the line.
It's kinda funny, you'll see and hear pro staff guys representing each of the different companies who make flashers using them both ways. My thought is that older flashers required you to hang the transducer lower because they were not as technologically advanced as newer ones are and they'd be more prone to false readings from ice. 20 years ago or so it was stressed that you hang it right at the bottom of the ice or below. Now this isn't stressed as much. Since "hanging it below the ice" became so ingrained in our minds it became a habit that's hard to break. The only way you'll know for sure is if you experiment with it and find out what is comfortable for you.