Okay, let's see......

Are you running a surround setup(5.1/6.1/7.1)?
Does the LFM-2 have a crossover-out(bypass)setting?
If you are using a preamp/AVR with bass management, let that do the crossover duties and set your sub's crossover to bypass, or set it at it's upper-most setting to get it out of the way.

I'd start with an 80hz setting and listen how that compares to a 60hz(or other) setting. Most people run 80hz for a multi-channel setup, but if you have the option of different x-over settings for front, center, surround and sub you can experiment.

The phase is there to help dial in the sub when calibrating using a sound pressure level meter, such as the one most people have from Radio Shack. The setting that gives you the highest sound level reading on the meter, at the set X-over frequency, is where you want to set it(0 or 180 degrees).