I've always seated them flush with the case mouth.
What does your gun ask you to do? It will tell you.
My K-38 doesn't like flush-seated WCs. Dunno why. Don't care either. They don't chamber or extract as easily, so I seat them into the groove and forget about it.
Your gun may prefer something different. If it expresses no particular interest, go with whichever looks prettiest to you. It's reloading, not brain surgery.
Possibly a combination of chambers that are at or near minimum diameter (good for accuracy, not so much for loading and unloading), and brass that is bulged from deep seating the wadcutter bullet. Not all 38 Special brass is created the same. Remington 38 Special brass is thinner and the transition to the thicker case head area is located much deeper within the case than many other brands of brass, making it easier to flush seat wadcutter bullets without bulging the brass.