Jake see what happens when you put Syrians and Egyptians in the same closet and throw SB at them you have a fight so now pack that Hookah in a nice sturdy box and send it to me I will take good care of it
1" above the down stem should be good for the water level have you checked for leaks and check the ports for obstructions. next check the hole pattern on the foil try and get some holes through the tobacco to line up with the holes in the bowl. Lose the diffuser for now and just setup the hookah as normal and first get it smoking to your satisfaction one you got that right then add the diffuser. Check the purge as well the ball bearing can be stuck open or missing.