I just put a Chet arm on a Falcon I recently bought and have it positioned a lot higher, the tip of the arm about 1.75" inches off the strings. This is roughly the same height of the standard Bigsby flat arms on my other guitars.
You'll also notice that at this height, the arm can actually swing in over the strings, something a standard Bigsby arm can't do. This makes it possible to play the Bigsby using your wrist! Now, that's something I honestly haven't ever seen Chet do, and I'm sure it'll take some practice to master, but the possibilities there intrigue me! First time I tried it, I was like "oh, this is way cool". LoL!
It's an adjustable arm, "right" is whatever works best for you. Like Baba Joe says, just loosen those two allen screws and set it higher. You could probably get a longer spring to push it up even higher, but I doubt you'll really need that. Somewhere between 1.5 and 2.0 inches seems to work for most people.
It's definitely more than a decoration! Good luck with it!
You know, maybe you are gonna need that longer spring. There's a big difference between the angle yours sits at and the angle mine sits at. I'm no expert, don't pretend to be, but I think what you're looking to achieve should be something like this ...
And yeah, I've got the plastic washer in there too, sitting on top the spring rather than under it. Seems to work OK..