What is the correct way to set neutral drive position on a cat hull?

up and down or side to side?

straight edge on the bottom so you can measure to the drives cav, plate.

up and down number six drives

Extend a long straight edge off the bottom of the hull, directly in front of the drive.
Measure front and back of the cavitation plate until you get it even with the straight edge.
Mark this on your indicators with a Sharpie or tape or something along those lines.

You could do it with a level too, as long as the boat is on a level floor.
Use the tongue jack to get the aft section of the hull level using your bubble level.
Then use the level to do the same with the cavitation plate.