What is the best position for hitting a smash, in terms of physical position, stance and hand placement?
As with all shots, you want to be behind the shuttle and on time so that you can do the full movement for a very powerful smash and don't have to reduce any part of the shot. That does not mean that you take the shuttle late though - obviously, the closer to the net you hit the shuttle the smaller the reaction time of your opponent.
In order to unlock the full kinetic chain, you want to rotate your right (assuming right-handed, flip every side if left-handed) hip into the shot, you should start with your right foot behind your left one.
The point of contact should be just in front of you and as high as possible without having to fully stretch your arm.
For an ideal smash (e.g. the world record), you also want to jump. The advantage of jumping is two-fold: First of all, the higher point of contact allows you steeper - and just more - angles, which are harder to defend. Secondly, by changing your center of gravity (a little bit like this cat), you can unlock additional momentum.
To get the most power, grab the racket at the bottom of the handle. Use the V grip, tightening the grip just before impact.
This answer only gives an overview about positioning. The correct hitting technique is a precondition for a good shot. And naturally, (the right kind of) strength helps as well. That's why professional players can hit amazing shots in very bad positions, i.e. behind the body. Have a look at the various online resources for more details. To get a feeling for the whole action and understand details better than text can allow, it may also be beneficial to closely study professional player's smashes.
As stated by phihag its true that one should reclaim a position behind the shuttle , yet its absurd its not the point here to return a smash but to enhance the opponents smash and place it somewhere.Hence your question must have been like how to react when an opponent hits a smash? For this you need a two tier system
The first one is the stability of the person receiving the smash , you could have noticed that many top players would retrieve the smash from any where ,some would even be on the floor yet they would do so ( notice these in doubles ). Hence develop a skill practice to put your body into stability , this could be achieved by hops,one leg stand etc...
The second one is that the person has to be good with the prediction of ones smash and the perfect gesture and reflex to face it , this requires sheer practice since the smashed shuttle might travel at any speed or direction it depends on the user how he faces them .
For instance certain players do take the smash recovery after cross a bound limit that's , one has to have a comfort and integration on what he is doing. Hence practice is the only way keep in in mind these two pops in your mind , I would grantee you a perfect return.