At what height should I install chair rail?
Although this is sort of an arbitrary question, and might get flagged, I'll pen a few thoughts.
There are no real rules to chair rails, I've installed them from 28 to 38 inches. Traditionally, some feature, like a window sill or a side board dictates the height so the lines flow around the room. But I always say, "beauty is in the eyes of the beholder". If you decide to go higher than your sill, be sure to back cut the rail 3 or 4 degrees so it will fit snug to the window trim, no gaps.

Finishing at an outside corner is pretty straight forward. The rail should meet the edge of the outside corner perfectly with a 30 degree miter cut. I think cutting short of the corner makes it look unfinished, especially finishing with a straight cut at the inside corner.  The end miter cut needs to be sanded really smooth so no cut off wood grain shows through your paint. I use a fixed rotatory sander for that job, but a delicate touch with a decent palm sander will work. 

Just my humble opinion, hope your job looks great when your done.  Good luck.