Where is the correct place for a body pad of a TO220 linear regulator in Eagle
So what is the right way of placing the polygon under the regulator
  body?


The right way would be to choose correct part package first.

If you want the part to be placed flat on the board, use SOT-223 or TO-263 package. The TO-220 is designed to be mounted vertically and bolted to the heatsink above the PCB. That's exactly the reason why Eagle library does not have a pad for it.

UPDATE:

The hole in the package is for mounting on heatsink. The manufacturers usually have guidelines for mounting their products, see for example the one from ST, or from Motorola.

FWIW, I think that footprint should not have been in the library to begin with. While bending TO-220 leads is possible, it is hard to do consistently in mass production without special fixture (the guidelines above call this fixture a "clamping tool"). Some companies offer customized lead bending, but it is for huge orders only.

One possible solution is to modify the footprint to make a hole in the PCB larger than necessary and use washers. Otherwise if you bend leads slightly off-place and force them into holes there will be a strain on the plastic body that can develop into crack overtime.