I have the same skimmer and it works great once it breaks in. The directions that came with it are another story, but the skimmer itself is good.
First thing you should do is turn the return elbow tword the back wall of the tank, this will help with any stray micro bubbles. Most bubbles will hit the glass and flow up the the surface instead of dispersing into the tank.
The next thing is to make sure that the outlet that everything is plugged into is GFCI protected, (Ground fault circuit interrupter) if you're slightly handy, you can switch out a regular wall outlet to a GFCI in about 5-10 minutes, it only costs about $10.00 and it could save your life. If you don't feel comfortable with electrical work you can buy a plug in GFCI at any home improvement or hardware store. With a GFCI if water drips on your power cords, it will trip the circuit before it causes any problems (electrocution/ fire....)
Back to the skimmer-
When you turn the pump off, any water in the pipe above it will flow back into the tank. If your airline is lower than the water level in your skimmer, it could flow into the airline, causing a siphon. As long as your silencer/airline is above the water level , it won't siphon, because the water will follow the path of least resistance which would be the pump inlet. If you run the airline through the little clip on the front of the skimmer, you'll be fine. Just don't mess with it while it's running, I was moving mine once, and gave a little tug on the airline which caused the pump to come loose from the pipe and it started dumping tons of micro bubbles into the tank.
You don't need to unplug the skimmer to empty the cup, the skimmer can't overflow unless something is clogging the outlet pipe. I've only ever turned mine off during water changes, (good time to clean the skimmer and pump) and I've never had a problem with it overflowing.
Also the next time you clean it, take apart the return piping and get that black sponge out of there, it's supposed to help with the bubbles, but it just gets dirty and clogged fast. Mine runs better without it.
The collection cup can't overflow, if it ever fills all the way up, the water will simply flow back down the tube into the reaction chamber.
The higher you keep the collection cup, the dryer the skimmate will be, this is mostly a matter of personal preference, and will determine how often you'll need to empty the cup. I keep the silicone band about an 1 1/4" from the bottom of the cup on mine, and I need to empty the cup (about half full) every three or four days. As far as finding the "sweet spot", it's mostly trial and error, set the cup at whatever level you think will work for you, and check back on it every fifteen minutes or so. If the cup is noticeably fuller after fifteen minutes, it's set way too low. Dump it and try it a little higher. Keep in mind that the fuller the cup gets, the heaver it gets, if you don't have the setscrew tight enough, it may slide down a little and fill faster.
As far as the pump goes, you're right, it's ugly as hell. Aside from trying to hide it behind some rock, I can't really think of a way to conceal it. If you come up with something, let me know. The piece that you want to remove is the part that covers the inlet of the pump. (Black plastic with slots in it, I think it just snaps into place)
They do make another model with an internal pump, but they are constantly sold out and hard to find. Those run about $150 or so. There's also enough room in that one for a heater if you're looking to hide all of your mechanicals. If you decide to go with one of those, pm me about buying your current octopus.
There are a few other mods out there for it, but in my opinion, it works fine without them. If you search around some of the other message boards, you'll find a ton of information on them.
I researched skimmers a lot before I bought this one, and as far as I can tell, this is one of the three best HOB's, and by far the best bang for your buck. I hope all this helps.
