That is correct, the cable plugs into the USB port on the console itself- there is no jack for a headset built into the PS3 controller. It is for this reason i suggest going with a bluetooth headset.
As for console positioning, I think vertical is the better choice as well. The vent for the outgoing air is on the end of the console by the disc slot and having it vertical should help the warm air vent out of the PS3 a bit easier.