Plant at the old level or restart the plant from a cutting taken about where the stem goes from brownish to yellowish in the picture (at the top of the red line). I don't think there's any rush to behead it, but I suppose that is a bit of a personal choice.
Most Echeverias grow stemmy as they age (and some when they are young). The amount of stem depends on which plant and how much light it is receiving. With aging Echeverias, an increase in stem length is typically accompanied by shrinking of the rosette (fewer, smaller leaves) and a gradual loss of overall vigor. Restarting them from cuttings gives you a chance to allow them to reclaim their youthful appearance. You do need to exercise restraint with the water in the weeks right after you pot up a cutting, and there is always some risk the maneuver will fail (more risk when you are first trying it, less once you get the rhythm worked out).
Burying stem when you repot is generally a bit risky, in that it tends to invite rot of the bottom of the stem. Different plants will be more rot prone than others.
If the stem is somehow unstable, I don't think there's any harm in packing that area with rocks, or putting a couple of bigger rocks on either side of the rosette when you pot it up. But try to avoid too heavy/thick a layer of rock across the top of the soil as it will tend to block evaporation and eventually entomb the plant below.
but I like most Echeverias to be low and compact, as an aesthetic matter, to the extent I can affect that. The rosettes will tend to be wider and fuller when the stem is relatively short. Also, providing brand new soil (to the cutting as it roots) can only help with rejuvenation.
