It sounds like there are two adjustments that may be getting mixed in with each other in this discussion. Engine height is adjusted by moving the transom mount up and down on the transom - or using a jack plate or adjustable hydraulics on larger motors that are equipped with them.
Tilt is the angle of the motor shaft relative to the transom, it is typically adjusted by moving a pin on the bottom of the transom clamp under the motor into one of four or five different holes.
The height of your cavitation plate relative to the bottom of the boat has to be set by lifting the motor vertically, not by adjusting tilt. Your cavitation plate, as an earlier poster said, shoud be about one inch higher then the bottom of your boat. You make this adjustment once and then leave it alone.
Then you adjust tilt on any given day depending on how your boat is loaded. If you have a lot of weight in the front, you will set the tilt pin out a couple of holes so that the angle of the prop tends to force the bow up slightly as you are running. This is positive tilt. When you are running by yourself (presuming a tiller steered rig) you might want to tilt the motor in so that the shaft is closest to the transom. This has the effect of forcing your bow down as you are running. Sometimes called negative tilt.