Elevation of pool pump

It does not matter very much. If it is a self-priming pump it can be quite a bit above the water level. If it is not (like an above-ground pump), then it must be below the water level.

If you have the inlet pipe right at the water level, then you would never lose prime because the basket would stay full even when you open it. This also points to the fact that you do not want the pump lid to be below the pool water level since when you open it, water would continuously spill out (unless you added shut-off valves).
 
Ours is slightly below, maybe a few inches, and it is kinda handy because it is sort of self flushing when we clean out the basket. We can dunk the basket up and down and the outward water flow helps clean out the basket.
 
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