derailleur naturally sits on the smallest cog, both front and rear, unless you have that silly backwards shimano stuff. As a result, your shifter should be in the corresponding gear ("9" rear and "1" front). It is handy that these are the only gears that allow you to insert the cable into the shifter, so you can't possibly mess up.
As for cable tension: Pull the cable tight, and crimp on the derailleur. Pull on the cable to seat the housing well, then pull in the slack that is created with the micro adjuster. From there, you can adjust the cable tension with the micro adjust. More tension = shifts to easier gears (larger cogs) better, less tension is the opposite. So if you can't get it to go from 7 to 6, turn the adjuster out. If you can't get it to go from 6 to 7, turn it in.
Hope that makes sense. I tried to simplify it a bit.