My old 1975 204C came with the engine in the top hole (all the way down). I mounted the first replacement engine higher up at the second hole. That resulted in more ventilation on turns and in rough seas, but I got more rpm.
The best thing to do is look at where your anti-ventilation plate is running with the engine trimmed properly and running at cruise speed. Have someone else at the helm and go back and take a look. If there is water running over the top of the plate, raise the motor one hole at a time.
The 204C is a funny hull. It doesn't respond well to engine trim angle, so if the engine is too high you will get a lot of ventilation when you trim out.