From my understanding, you have it right. It helps close the gap and smooth the airflow. I think results are mixed when the arms are tilted up. Not sure if tilting up the bta setup would mitigate and drag increase.

Yea, it's neutral. The only thing I will say is for longer races with aid stations, I find it a PITA when they hand out open/top removed bottles as they leak like mad as replacement bottles.

The way I have mine set up, it pretty well completely fills the gap between my arms.
I've also got my computer tucked in right behind it, out of the wind.

With the straw, I don't need to move my arms out of aero to get a drink, and the flip cover, I can quickly squeeze a replacement bottle in as I roll by an aid station.

The straw in of itself isn't very aero, but I can take constant little sips, without moving my arms around.

It's supposed to close the gap behind your hands, so the bottle should be flat and right between your forearms.

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ECMGN Therapy Silicon Valley:
Depression, Neurocognitive problems, Dementias (Testing and Evaluation), Trauma and PTSD, Traumatic Brain Injury (TBI)

This is my point though. If the BTA is designed to stop airflow through the arms it should surely be at the forearm angle, in that pic then horizontal, but arms up, it should be inline with the forearms.

Or is it just a neutral position? Does it stay neutral if the forearms are tilted?

The airflow is horizontal, so the impact is totally different if the arms are angled up.

With the arms angled up, the bottle serves to block airflow into the chest cavity (but only if the arms aren't touching...which they often are in "praying Landis" setups).

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ECMGN Therapy Silicon Valley:
Depression, Neurocognitive problems, Dementias (Testing and Evaluation), Trauma and PTSD, Traumatic Brain Injury (TBI)