I would hang them 3-inches above the top of the window molding which will line up to be just below the transom line. Reason: if you hang them higher than 3 inches there is too much wall showing below the rod and it will make those two narrow windows look narrower visually as it emphasizes the vertical. If, f.ex. the decision was made to remove those windows, take out everything between them and do a huge picture window in that space, then I would hang the draperies at the level of the top of the transom because the window would be much more horizontal and the effect would be different.

This new fad of hanging the curtains tight to the ceiling works best if you do not intend to ever open them. That creates an illusion of bigger windows. Other wise as you can see when open the HUGE space between the window and frame just looks ODD. This is in the eye of the beholder. Again, just above, the NEED to add yet another covering, the woven shade is just SILLY. Every space is different and IMHO yours does not warrant curtains against the ceiling. You do not have architecturally beautiful casings to show off. I would place the rods in a more traditional manner a couple of inches above the window and call it good. You have the added challenge of the baseboard heating. It would be ill advised to have curtains falling in front of them to the floor. I am not a fan of shades of any sort but perhaps your space demands them?

Hard to say without a picture.

@Jan Moyer We are building a guest house with 10’ ceilings and i am planning to install outside mount woven shades and sheers as in your mockup photo. I have 2 more days to do any additional blocking for shades and curtain rods. see photo i planned to hang rods about 9” from ceiling in case we later add crown moulding Question 1: is this height ok? 2. Is this enough blocking? or need more? 3. For nearby kitchen and mudroom windows, should they also be outside mounted to provide the most light ? or since they wont have sheers, should they be inside mounted? thanks!