The best mic placement is generally the best sounding spot in the room -- could be high, low, left, right, etc. Typically we can't run our mics absolutely everywhere, though, so...find the best sounding spot you can. Then it's generally best to get the mics above the crowd, if possible. The two most common ways: setting up a stand in open-taping environments, or mics worn on your person in more stealthy situations. For stealthy situations: be creative, you'll figure something out to get the mics as high as possible.
Yes, it's normal for sound quality to suffer -- especially mid and high frequencies -- if you're recording from seat level. Next concert, stick your head down at the base of the seat (or at a standing show sit on the floor so your head is at everyone's hips or lower) and see how it sounds. It won't sound good.
Whether or not it's better to add gain during recording or in post depends in part on your recording gear. Adding gain may cause hiss whether added during recording or in post. It depends on your iPhone's capabilities and limitations. I'm not familiar with the iPhone's capabilities and limitations, and I'm guessing most here aren't, either. But you might get lucky and have someone chime in with first-hand experience.
Generally speaking, it's best to record with levels reasonably close to 0 dBFS. I'll often shoot for anywhere from -12 dBFS to -6 dBFS, depending on the source I'm recording, in order to ensure I won't clip (hit 0 dBFS) due to an unexpected peak. But that assumes that one has quality, clean gain for achieving proper recording levels. I have no idea if -- or under what conditions -- the iPhone provides quality, clean gain, or if it stinks, or somewhere in between.
It might be best to set the levels as close to peaking as possible while recording. Or leave the recording levels quite low and raise in post. Or perhaps somewhere in the middle. It all depends on how and how well your iPhone provides gain under various conditions (e.g. generally speaking, low, medium, or high gain). It may sound fine at low and medium gain, but terrible at high gain. Or it may sound terrible at low gain, but okay at medium and high gain. Your best bet: run a test or two. Record something LOUD and try a variety of gain levels on the iPhone. Then normalize each, and compare to determine which sounds best.