I used an Ergo from when my DS was three and a half months old, but he was very tall for his age so had the length in his upper leg to be able to be carried legs out comfortably. He was also sufficiently tall in the torso to be able to be carried comfortably. If your DD is not particularly tall, she may still prefer being in the infant insert, which can be used from birth.

An SSC like the Ergo has a heavily padded, structured waist and is worn non-apron style. A mei tai can be worn apron style as well which creates a pouch, making it suitable to be worn froggy style (ie: with legs tucked up next to their body). Although I know people who have successfully and comfortably carried their babies froggy style in SSCs (including in the Ergo), it is not recommended, because if the waist band is not tightened sufficiently, there is the possibility that the baby could slip out through the bottom of the carrier. In truth, it is highly unlikely to happen if you exercise caution and ensure that the waist is well tightened, but no manufacturer would make themselves liable by recommending it, especially in the litigious US.

The reason that you have noticed a difference in where her head sits is because her bum is further down or up in the seat each time you put it on. When you are tightening the shoulder straps, bounce her up and down in the carrier a bit (you may want to do this one handed and support her neck whilst doing so at her age). This will drop her down into the seat a bit more (bum should be lower than knees), in turn bringing the top of the carrier lower in relation to her body. Alternatively, if she is too low in the carrier, when you jiggle, tug the top of the carrier to bring it higher up (more of an issue when she is older).

Arms are usually in at her age, so what you are doing is correct. Once she has sufficient torso control she may enjoy being worn with her arms out
(some kids do, some don't). The Ergo has a relatively short body compared to some other carriers, so this is an option at an earlier age.

HTH!