I want to clear this up...because there's some stuff in here that's pretty wrong.
Firstly, when your pump is cavitating, that just means it's sucking air, no more. Water is incompressible, so you won't be able to make bubbles out if it without there being air in the loop already...shy of supercavitation at least. This is bad because the pumps that we use for WC are largely based on ceramic bearings which rely on the fluid they are pumping to cool and lubricate the bearing. Run dry, the pump can fail quite quickly.
Secondly, the location of the pump in a closed loop generally won't matter...certainly not in the case of the pumps that we use in any common computer case. You're talking about the pump's head needing to overcome restriction because it's at a high point, but this is incorrect. Any fluid that it fights gravity to move up eventually gets a gravity assist back down, this is the nature of the closed loop.
If you have your res immediately before your pump (which it should be, and in this case is an inherent feature of the res/pump), it does not matter where in the loop your pump/res is located. Air naturally tries to work its way to high points (flow in the loop can move it from these points, it won't just sit at high points), so if you have your pump near a high point and the res is not immediately before it, then you can run into issues of sucking air through the pump...which, as I mentioned earlier, is bad.
Hopefully that clears some stuff up. Feel free to have reasoned discussion on this.
Sorry, but lots of schooling and practical application say other wise. Pumps cavitate due to pressure drops, not just air in the system. If you dont have enough pressure prior to your pump, you can cavitate your pump, regardless if there is air in the system or not. You're implying pumps can't cavitate if the system has no air, which is completely untrue. This is why valves can cavitate as well as pumps. Supercavitation has nothing to do with pumps also.
When I first posted, I wasn't thinking he had an attached reservoir, and his pump was ABOVE the cylinder reservoir he had installed, hence my relative alarm at his setup. With the reservoir attached, that kind of changes things, but pumps still operate most efficiently at the lowest point in the system. Location matters 100%, closed loop or not. Maybe not AS practically in this situation, as it is a relatively small system and he has an attached reservoir, but in general, it always matters to some degree.
Last, but not least, the more pump head you have, the higher your pumps output on a centrifugal pump. This means, more water faster which means a more efficient system.