During my first cook on my brand new SJG last year, I had no idea how to create the convection with the high side vents so I covered the entire bottom grate with lump. It was bloody hot with the lid off, but nearly went out completely with the lid on and all vents open. Since then, I realize that setup #1 in the diagram works best for me. It gives you maximum clearance between the grate and the top of the lid, and even heat from both sides. Of course, one thing that may not be obvious from the diagram is that when you place the drip pan with either end next to the side vents, there has to be clearance and a charcoal-free area there: in other words, don't make a ring of charcoal; just two side piles.
I still reiterate my original opinion; that is, that Weber should have designed the SJG with a scaled-down ash can, à la OTS. It would have given the best performance. The other solution would have been to put the side vents about an inch lower, closer to the bottom grate plane, to encourage cold air venting. I think that they put them as high as they did to maximize the safety factor during portability, when full of ash and unused coals. Just my thoughts.