I agree with Dennis on this one.

Yes, it's true that the engine "unloads" in the air and reaches a higher RPM than you see on the ground, but that's not what is meant by "peak" RPM when setting the needle. When setting the engine, the peak RPM is the highest RPM reached while slowly leaning out the engine. Once you reach that point and go a click or two past it, the engine slows down. You can set an engine using a tachometer, just go up to peak, then go back down on the rich side 500rpm or so and it will be fine.

Dennis is also right about the nose-up test. The RPM should pick up slightly when nose up with most engines. Some engines draw fuel so well that you won't notice much RPM drop, though these are the exception, not the rule. Another way to test the engine on the ground is to give the fuel line a solid pinch. The engine should pick up RPMs then sag or die. If it just sags and dies with out the RPM increase, it's too lean. Some guys get redundant and do the pinch test while holding the plane vertically. (A three-handed operation). And some guys set their needle with the fuel tank half empty, since most engines will draw better with a full tank and go lean later in the tank. So they set it at half-tank, top off, and fly.