Ray there is no Correct position. You set the switches according to the amount of micro stepping you want to use.

Usually on the top of the drive they will show differant combinations of switch positions for each micro step setting you want.
if you set to micros stepping to 800 or 1600 you'll be ok. This may be shown on the drive as 4x and 8x.

I've got a M542 here and 1600 would be switch 5=on 6=on 7=off 8=on
800 would be 5=on 6=off 7=on 8=on
This doesn't mean yours will be the same as there are lots of copy's that don't always use same settings so I'd check the drives or the manual you got with them.

Now this is not the end and why your getting the wrong amount of movement.?

You need to set the Steps per unit in Mach3 motor tuning. To do this divide the micro step amount by the pitch of your lead or ballscrew.