Answered My Own Question
It took some searching, but the recommended way to set up the Bow Stop is to have it just above the Bow Eye on the PWC with the winch line attached just below the Bow Stop. See Photos.
I found several variations to this set up, but this is the best. You also want the bolts that connect the arm with the Bow Stop to the winch resting as close as possible to the vertical post, and this arm angling up.
It is amazing that this information was so hard to find. The trailer I bought was set up completely wrong, and the guy I bought it from had the winch line run over the top of the Bow Stop. I found out the hard way that this was incorrect, when I hit my brakes hard the PWC came forward over the bow stop about 6 inches. Fortunately I had it tied down in back.
Anyhow I hope this helps someone else. It is amazing that this isn't even covered in the trailer instruction manual???