I would say the most important thing about this drill, either on land or in water is to keep the elbow gut side of the body. You do not want a straight line from shoulder - shoulder - elbow! It stops the very common tendency to lift the elbow above your body.
So I don't worry so much about the height. If you over exaggerate the bend at the shoulder, I consider that a good thing. I practice drawing tear drops on the floor to develop the idea of an out-swinging recovery. I also use this to introduce the feeling of stretch in the top armpit as you reach entry point. Both of these are demonstrated well even if the arm is a little low.
If you want the movements to be exact, the water level would be just below the front of the top shoulder, so drag the fingers at that height. Remember that you want to lift the elbow very little. The rest of the height comes from straightening the arm some (like from 90 degrees to 45 or so).