Setting jointer knives - tolerances?

Hello, I am in the process of setting knives in my jointer. I have been using a dial indicator to check the alignment with the outfeed table, and have been able to get the knives and outfeed table aligned within .003"



My questiona are:



Q1. is is this too big a gap? Should I be aiming for 0.001" or less?



and



Q2. what would be better - the knives .003" under the outfeed table level, or 0.003" above the table level