The refugium is mostly for salt water yes. You can grow the macro and such to help filter better. However, having this in my case will allow me to grow some other fragile plants which will help filter water more that will otherwise be eaten by the cichlids.
Honestly, I have it more for a true "refuge" from the main tank vs. better/more filtration. Remember it's not a huge tank and I don't have a lot of space. It will allow me to separate any problem fish for a bit or use it for fry in the unlikely / awesome / hopeful event some breed
As for the arrangement, that's not really a set in stone thing. If you really want to use it for filtration then yes, it should probably be in the middle so all the water passes through on it's way back to the tank. I have separate valves to control the flow here as well. Again, it's mostly for fish AND I'm a newbie... we'll see how it works. If it sucks we'll rebuild right?