Personally I don't see the advantage in TMO to using anything other than relatively shallow setting with impact pistols. 4-6 feet or so is what I tend to use. For magnetic, I think the common wisdom is to set it to exactly the keel depth of the target.
In rough seas the torpedo may broach when set shallow, but I've not seen it cause the torpedo to lose it's track, but perhaps it might make it easier for the AI to spot it, but my experience is it makes no difference.
Deeper settings would be preferable I think if the sinking mechanics were handled differently, and might be dependent on which other mods you use. But for me, shallow is the best.
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