BYO has a nice article about kegging.
The author states that when using priming sugar he sawed 2 inches off the bottom of his dip tube....sounds like a good idea to keep the sediment down.
I'm new to kegging and haven't tried natural carbonation, but I know a couple people who have had great success at it.
As far as amt. of sugar to use, I always 5 oz. for 4 or more gallons of well attenuated beer and my bottles have always had more than adequate carbonation and never too much (just make sure you have good attenuation or you'll have problems).
As stated above, you can always pull the relief valve if you have to much carbonation, so you could probably get away with slight over-priming to ensure your beer is adequately carbonated.