</font><font color="blue" class="small">( But my question is still...is it better to have it set up to operate with the 3PH all the way down or slightly raised? Doesn't all that weight and bouncing around harm the seals/hydraulics if it's not all the way down? )</font>
No it doesn't hurt it to have it up a little. The hitch is made to handle it, Look at it this way, a 1200 pound backhoe riding around on a 3PH and it doesn't hurt it, I don't think your brush hog will.
I have a round bale speer I put on the back of my 354 and haul round bales 1300lb ones everyday.
What damages your hydraulic lift is lifting to high (stops not set right) and the sealing oring runs past limit and pops out of the lift cylinder past the limit of travel, even at that its not a big deal to fix, just messy.