Etiquette for the Stack in MTG
What is legal?

Cards go on the stack when you cast them. They remain there until they resolve or are otherwise removed from the stack.

According the the Tournament Rules, the current zone of any object is free information. The stack is a zone. Therefore, the presence of an object on the stack is free information. 

It does not matter where the card physically goes, so long as it is clear that it is on the stack. You are not allowed to obscure or otherwise misrepresent the presence of an object in a zone, because it is free information. 

What is considered good etiquette?

There is no official etiquette about where in the table you should play your spells and how exactly a complex stack should be built.

I play in a lot of tournaments, and most players put the card somewhere on the table where everyone can see it. Some players (incorrectly) put the card straight into their graveyards. Some players like to play the card behind their lands, perhaps to gain some kind of advantage by making it slightly more difficult for me to read. 

When we build a complex stack, very rarely do we build an actual physical stack. To do that requires the cooperation of both players, and it also requires that all of the spells be tangible cards (i.e., not a trigger or an activated ability). Perhaps the most common situation in which I see a stack built with cards is during a counterspell war, such as the example you gave in the question.