If using standard lug materals the forward lug is usually minimized by reducing the length to somewhere around 1/8 -1/4" depending on the diameter and overall size of the model. Since we try to hide the LL's on most models not to many photos to show these effects 
Well, I've seen rockets bind on the rod because the lug is in front of the CG. The rocket gets just a bit sideways, and the leverage of the engine over the lug binds it in place.
Is it possible to set it too far back, though? And if only one lug is used, is there any kind of rule of thumb regarding the length? Unless specified otherwise, I have usually positioned mine to straddle the CG, but I will start placing them further back from now on. I have never had any problems caused by my placement of the launch lugs, though. I do have several clones that use two widely-spaced lugs (pretty much mandatory on long rockets), but I placed them like that per the designer's instructions. All of my Bic Stic MMX rockets also have pairs of short lugs placed at the top and bottom of the tubes, in keeping with Art Applewhite's design.
I prefer to straddle the CP. My rationale is that binding on the rod is more a function of crosswind than weight. A really good example of this is trying to launch a rocket glider with a breeze. Since the lug is all the way forward on the motor pod, only a tiny breeze is needed to twist the lug snug on the rod. Thus, I like to counter the effects of wind by spacing two lugs either side of the CP.
Bravo. That's a pet peeve of mine. Square cut lugs are...well, they strike me as neanderthal. They look slow and primitive.
I sand all four rods on my stand every time I set it up. Considering that we generally get in only 16 to 20 flights each outing, that seems good enough.
I recall reading that the drag of a launch lug was the same as that of a solid object of the same shape. So I doubt closing off the launch lug will reduce (or increase) the drag.
I'm not all that worried about aerodynamic drag from the launch lugs; perhaps that will start being a concern someday, but not right now. At the moment my big worry is having my rockets fly so high that I lose track of them and never see them again; that has happened a few too many times already.
MarkII
I try to do just that, but sometimes new rockets surprise me. Our club's main field has a G limit, but I rarely fly anything there larger than a D. Even so, at my very first launch with the club at that field I lost a rocket on a D12 in its maiden flight. It just went up, up, up and we never saw it again. In that and other incidents like it, we didn't lose track of the rocket because it drifted out of the field during recovery -- we lost them during the ascent, when they climbed out of sight and were not observed again. The field is certainly large enough to afford good views in all directions (it is near an airport) but that doesn't mean that we can always track every rocket back to the ground. Often there are only two or three people who are watching any given flight, and depending upon how busy they are, not everyone watches them past apogee. Anyway, my point is that launch lug-induced drag hasn't emerged as an issue for me in the 10 years that I have been flying rockets. Perhaps it will someday down the road. I hope one day to be able to fly many of my rockets at their optimum performance level; when I get to that point I very well may start to pay more attention to limiting the drag caused by the lugs.Fly the field mark, Fly the field; Just because we can stuff the model with a C, D, G or UP motor doesn't mean we always have to fly it with the largest thing we have on the field.
Very true, John. I just wanted to get two points across. The first: in sport launching, we often fly rocket designs that have serious sub-optimum aerodynamics anyway. Many of the futuristic designs, as well as others, that we love so dearly are like that. But that's OK, because rocketry would not be nearly as much fun without those fantastic designs. But a focus on the drag caused by the lugs, when the rest of the rocket has so many other streamlining issues, seems a tad misplaced. If we are so willing to accept so many other aerodynamic compromises in many of our rockets for the sake of aesthetics, etc., which most of us are (and why not?), then the drag issue with the lugs shouldn't be all that big of a deal.
Which is what we're doing by splitting the lug into two parts, burying it or at least one part of it in a fin/tube fillet and minimizing the forward portion as much as possible by angle cut, tiny length or "antenna ring" wire methods. All these tiny minor detail things just make for a better looking and little bit better aero model regardless of end use..sport or competition.
