Great question!
I use die cut 3M, specifically cut for the iPod Touch 4th. I clean everything off. Most importantly, clean off the mid plate on both sides of the home button with a heat gun. A mini hair dryer and 92%+ alcohol with the rounded end of a metal spudger that iFixit sells works really well too (along with a static-free cloth to dab off the residue).
After you apply the die cut, I suggest with the left over you cut two small rectangles out of the 3M and place them on each side of the mid plate where the home button is.
If you seat it properly, angel at 30 degrees at the top and work down the sides, (don't forget to put the proper "Z" fold in the thin digitizer cable or the top left of the screen will "float" when you seal it) you can feel the screen pop into different places and it will be perfectly flush.
I save the big center piece of the die cut 3M patches ... in a pinch you can use an exacto to cut strips if you happen to run out of die cuts. Also handy for sticking other things down in other electronics.