I don't really understand what the first diagram is trying to describe, but the second one is easy enough to explain.
To place an object in the air without using InstaLower, you alter the bitset to raise the height.
Now, to add the bitset into the WAD in WadAuthor, you right click on the object, and select "Edit Raw Data". You'll see a box with "bitset" labeled and a number, like 0x0007. The 0x signifies that it's in hexadecimal, and the rest is the number, in this case, 7.
Basically, you multiply the height above the ground for the object by 16 (32 for Player Starts and Eggman), convert to hexadecimal, and add what is already in the bitset.
For instance, if you want to place a ring on a platform 256 units above the floor, you'd multiply by 16, and convert it to hex. You'd get 0x1000. Then you'd add what is already in the bitset, which would probably be 0x0007. 0x1000 + 0x0007 = 0x1007, so you'd place that number in the bitset and it would place the object 256 units in the air. Note that with rings, you generally want to add 32 before doing the conversion, because rings normally float 32 units above the ground when you use the Deaf flag, but that doesn't work in the air. Hence, (256 + 32) * 16 converted to hex gives you 0x1200, so you'd end up with 0x1207.
This will let you place an object up to 4095 units above the ground (or 2047 units for Player Starts and Eggman). Beyond that, and InstaLower is the only way, but since you can't create a sector more than 6144 units tall without making the game unstable, that's not such a big deal.
