As you know, there are several ways to hold the guitar. The classical position is more stable, since you contact the guitar with both legs, your chest, and both arms. It provides a good angle of attack for the picking hand, allowing for close to a 90- degree angle of attack with the fingers without bending your wrist to the side. It also provides a good angle for the fretting hand, and, for near-sighted guitarists, the neck is close to your face!
Having said all that, when I sit, I prefer the ‘folkier’ horizontal position, with the guitar on my right leg. I do this largely because that’s how I learned early on, and also because it appears less “formal” onstage, befitting my performance repertoire and my onstage persona.
For me, to get the same angle of attack with the picking hand that a classical player gets (again, you get the best tone production if you come close to that 90-degree angle of attack across the strings), I allow my right wrist to relax so that it bends sideways a bit – my picking hand is aimed more at the floor that way. This allows me to pick directly across the strings, like a classical player does with his/her straight wrist and the guitar angled up. If you have a moment, I think you can see my right wrist bend a little in this YouTube video: http://www.youtube.com/watch?v=W3u3iC3oiMA
Whichever position you choose, be as relaxed as you can be with both hands/arms. Excess tension comes through in the music, and will impact your ability to play beautifully over an extended period of time. Above all, have fun!