Great diagram Shazzam.
Hopefully Matt you can now see how by rotating the hub (as you do when adjusting the chain) the position of the spindle actually changes (moves around the clock face). Not only does this effect chain tension, but it also will cause the ride height to change, i.e. the ride height at 12 O'clock (spindle at top) will be lower than 6 O'clock (spindle at bottom). This is why you often hear people advising to make a note of your ride height before adjusting you chain, as any adjustment to the hub (to tighten or loosen the chain)will have a direct effect on the ride height.
So...as shown above, the ideal area for the spindle is in the 4-5 O'clock position. It gives a longer wheel base (aiding stability) yet still allows for some chain adjustment if required. The ride height can then be adjusted seperately via the tie rod to acheive the required height/handling characteristics.
