The top of my bars near the stem are only 1.5 inches below the top of the saddle. That's perfect for me: I can easily ride in the drops or on the hoods. The drops have better control on fast downhills, and are easier on my hands on very rough roads, since the load is spread out over my palm.

So many riders have their bars low, and so they rarely take advantage of the drops.

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Headset adjustment:
Park tool's repair guide has a detailed description.

This is easy once you understand how it works:
1. unscrew both the pinch bolts until they loose.
2. Lightly turn the top cap with a hex wrench -- this usually only needs a light touch with two fingers on the hex wrench. Tightening it transmits the force through the stem clamp and the spacers to the headset bearings.
3. Once they are adjusted correctly, the two pinch bolts are tightened, which locks the adjustment in place. At this point, the top cap is not affecting the bearings any more.