Everything I have always read or been taught has been to set the string on the Yplane and the sight on the X. This seems to work well for me.

I also typically set my 3rd axis on a "Medicine Stone" bow vise. I have used the plumbob, and the Medicine Stone is much easier. I will set it on the vise, then check it on a plumbob at full draw to make sure nothing changes from rest to full draw, it saves you from having to get to full draw, then adjust , get to full draw, adjust, etc. And as everyone above says, yes 3rd axis is VERY important. Around here there are a LOT of shoots with some serious up and down hill shots, and it will help considerably if you pay attention to that bubble on every shot.