Without seeing your heater, I"ll take a stab at answering too
Are you sure it's a submersible heater? Submersible heaters usually say "minimum water line" , meaning that they must be submerged at least up to that line.
But if it says something like "do not pass", you probably have a non-submersible heater. Do you still have the box or anything that came with it? It probably says something like "do not submerse" above that line. So you must keep the water level no higher than that line, or else you might have disasterous consequenses like jaysono mentioned. 8O
If you have a submersible heater, that means you can put the whole heater, dial, and cord into the water. That's the type of heater you can position it horizontally at the bottom of the tank if you want. But it doesn't seem like you have that type of heater.
I have submersible heaters, and I have the whole heater, dial, and about 3 or 4 inches of cord in the water. Since you can't submerse your heater below that water line, if the dial sticking out of the water is a problem with closing your hood, you could get a submersible heater. I have the new Visitherm Stealth heaters.
Actually, it's a good idea to have a spare heater on hand if one breaks. (If I had listened to my own advice, I would not have had to make a mad dash to the hatchery one Sunday! Now I have like 3 spare heaters, lol.) You could use the Visitherm and keep the non-submersible for a spare. Here's a link on the Stealth heater. They are on sale now at DrsFosterSmith: