I stuck mine to the top left of the case (on the inside), roughly above the power LED. It works just fine through the plastic in this position, maybe a bit easy to activate accidentally depending on how you hold the system when you play. One thing to note is that the solder on the sensor is (or can be) pretty brittle, so make sure to treat it with care when you're placing it and maybe resolder if you're worried about it. To place mine, I waited until I had everything else back in the case, removed the adhesive backing, and used tweezers to position it and press the sticky part up against the case. I've been using it for a couple of months with no issues so far.
If you don't care about the brightness adjustment feature, I'd recommend just removing it from the LCD board altogether—less risk of interfering with other components that way. The screen resets to max brightness every time it's powered on, so you don't need to worry about making sure it's set correctly first.
Edit — also, wipe that screen down/blow it off with some compressed air before you stick it back in the shell! The dust is making my OCD kick off


We here shall not rest until we have made a drawing-room of your shaft, and if you do not all finally go down to your doom in patent-leather shoes, then you shall not go at all.