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On a steel string guitar, how high should the strings be, off of the 1st fret? I've read .020" for bass E and .012" for treble E.

Does that sound right, or can you go lower?

here is the best advice I can give you Diane
Save some string ends and use this as a gauge. When you pluck the string work a .012 E under the string. Keep going down till you hit the string. You know know just how far you can go without buzzing so if you pluck the string HARD and you don't have the buzz go down.
If you have about .010 above the fret with a moving string that is as low as I would want to go.
This may be different from one guitar to another.
I have a rough nut gauge that sets me at .007 off the top of the fret on a non loaded neck.
with a good prepped and level fretboard you can get rather low action without buzzing

Thanks John.

Frank Ford's take on the issue:

http://frets.com/FretsPages/Musician/Ge ... ction.html