They can go either direction. I have several large colonies with the heat pads on the bottom. In winter, I stack the egg crates horizontally and this helps trap the heat throughout the enclosure. If your not concerned about heat then go vertically.
Lots of holes means your dubia are not getting enough food. I don't feed roach chow or water crystals. Instead of water crystals, regularly provide fresh fruit such as oranges and cantaloupe or veggies such as carrots or sweet potatoes. Water crystals don't provide any nutrients and I think are more difficult to clean out than an orange rind.
Roach chow is fine but I think it's easier and better to provide carbs from your pantry. Give them bread, cereals, etc. If you need a larger food supply then a bag of chick feed works great!