RE: Peep sight location
6" doesn't sound to bad.On my target bow my peep height is 6 1/8" from bottom of nocking point.At full draw it is 4 1/4" from center of peep to center of arrow shaft.
Don't worry about the pin gap! As long as your peep is in a comfortable position where you don't have to raise or lower your head to see through it you'll be fine.
I set my peep height for 40 yds.
To set it:Pick the distance most of your shots will be,whether it's 20,30,40 yds.Go to that distance and draw your bow and come to anchor with your eyes closed and your head level........open your eyes and you should be looking through the peep.