It's largely a matter of personal preference and requirements. I have a Touratech 35L and 41L on my KLR, mounted roughly parallel to and a couple of inches below the top rack, with the turn signals relocated.
Mounting the panniers high gives you more ground clearance in turns, which is quite important since the panniers usually stick out quite a bit. Parallel to the rear rack/seat was mostly an esthetic decision for me, but I thought it might also come in useful if I ever wanted to distribute load across both the panniers and the seat and rear rack. It's probably best to mount the panniers as far forward as possible, but the more forward they are the more they're in the way of the rider's legs, especially when trying to walk the bike around while sitting on it. Leaving enough space for a passanger's legs is another consideration. When you balance these out, I think you'll find there isn't really a lot of leeway in how the panniers can be mounted. Relocating the turn signals is pretty much unavoidable, in my opinion.
Cheers,
-Lujo
'99 KLR650
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