Edit: oh he said "machine zero"
I would set this near the top Z limit. A little bit below is good, so it is not working the limit switch mechanism when returning to home.
Part zero at the most relevant top surface of the part. Some like to set part zero at fixture height. I can see their reason for this, but I'm not used to working that way. Like Klaus said, I always know that any Z- movement is most likely into the workpiece stock.