flat is better. And that how i got mine since I had the 360. And having flat is what we old schoolers would put our console at. but you new schooler most like do that then the way we old schooler would put a XBOX on out entertainment stand.
I've never stood the xbox up. Why risk it falling over when it's perfectly fine laying flat? I understand space issues but when it comes to a piece of machinery like the xbox I think it's proper to make extra space for it. My cousin had his crammed into
an entertainment unit with a stereo and all the other home theatre gear and it red ringed pretty soon after that.