I know the yellow side is on top and the red is on the bottom, but which way does the filter sit. Are the notches supposed to be towards the engine or towards the wheel fender?

Also, it seems that the filter just sit loosely on top of the bottom portion of the box. Does the rubber edges actually fit inside?

Also, how often do you clean your filter? I've around 12,000 km on the filter and the red side already shows a 70% of dark patch.
Is this normal?

 

1) It does not matter
2) I'd say clean at 20k kilometers. It should look dark on the red side - that is the dirt not getting into your engine. If it is quite dark on the yellow side, clean and re-oil.