Depends a bit on the size of the tank and what you are looking to accomplish with the filter. If you do not need to airate the water then I would just place it vertically. If you need some airation and want to generate a particular current then perhaps you want to consider using it like a spray bar mounted just above the water level with the streams hiting the water surface at the back of the tank. I use an XP3 on my 55 gallon fresh - this is now my favorite one peice canister filter. It is rediculously simple and very, very effective. Good choice.
Bubbles also depend on whether or not you need the additional airation. I assume you are referring to the bubbles generated by the venturi attachment. You can plumb the xp2 with out this or shut it off completely as I recall. Also, I'm not particularly a fan of those unless you really need the additional airation. The free floating bubbles sort of make the water look dirty.