Dan, as far as the sub crossover control goes, if you set all speakers "small" and the low frequencies are assigned to SBWF, not both, the sub crossover is unnecessary. Since the EP350 is one of the subs that doesn't have a switch or input that bypasses its crossover, the next best thing is to set it all the way up around 150hz, where it's out of the way of the 90hz crossover the 1300 does.
The sub level control doesn't necessarily have any good starting point. The idea is to set a proper sub level, either by ear or by meter. Both the control on the sub itself and the provision on the 1300 for changing sub level effect this. Some like to start with the sub control low and the receiver sub level around the middle. Then the sub control would be raised until the level on the meter or by ear is about right. Most subs are set too loud; they shouldn't be so loud that they draw attention to themselves. The idea is to give the impression that the sub is silent, but the other speakers are putting out more bass.
On two-channel, I don't quite follow, but the sub handles the low bass for that, just as it does in 5.1 play.
