Chimney depth help

I am not an expert but i believe it depends on the type of smoker. On my chargriller with side box, I read to mod it by extending the pipe down in order to hold heat better. However, the smokehouses I've seen didn't extend down into the house at all, or very little. When on a vertical smoker, I've seen guys install a baffle to keep the smoke from just shooting straight up and out. In theory you want the smoke up and out but there is a limit I suppose. 

Let the guys here know exactly what you're building and I'm sure they'll give you more assistance.

If it were me, I would weld it flush with the top of the smoke chamber. If you sink it some into the smoke chamber will you get in the way of any racks or food? If it were not an RF I would sink it to grate level.