I have a Lonestar Special, but the loop circuitry is identical to your Classic. I use a Akai Headrush delay in the loop. I am using a 4 cable method, using a Hosa stereo cable to make the connection between the loop send/return and the delay in/out. This setup works very well. I personally perfer not to have chorus in the loop, but doing so would work great as well.
Because the Lonestar loop is a series loop, your entire signal passes through whatever you have in the loop, plus goes through all of the cable between the loop and the effects (in my case a 14 foot cable, or 28 feet round trip). That is something to consider if you are concerned about "tone suck". However, in practice, I have found only a very slight loss of high end when using the loop - noticeable while playing alone at home, but negligible in a band context. The loop is a tube buffered circuit, so the chance for high end loss due to cable capacitance is much less than the cable from your guitar to the amp (assuming you aren'y using active pickups).
As an experiment, I've used a true-bypass looper in the loop, with my delay in the bypass loop, to compare the effect of the delay in and out of the loop's signal path - just to satisfy my curiosity on how much running my signal through the Headrush was affecting my tone. I could hear no difference, which tells me the buffers in the non-true bypass Headrush are good quality. I think its a fair tradeoff for having your time-based effects in the loop, coming after any pre-amp gain or overdrive. Delay before overdrive always sounds bad to me.
It would be nice if the loop were switchable like the Mark V...there may be a mod to do that since the loop is controlled by a mini-toggle on the back. I haven't looked but if that mini switch is a SPST then it would be easy to put that on a footswitch. People have done this with the Drive switch and its an easy mod. You would have to perfectly balance the Output control such that switching the loop out would not change your overall volume as defeating the loop takes the Send Level, Output and Solo controls completely out of the circuit.
As far as settings (back to your main question), there isn't that much to it. I set the Send Level knob on the back of the amp to about 1 o'clock. It gives a slight boost to the signal, a little above unity gain. The Output knob on the front of the amp you can use as normal as an overall master volume. Basically, follow the instructions on pages 12-13 of the manual and you really can't go wrong.
Good luck and report back with your results! Lonestars are such great amps, and really well thought out in terms of practical gigging situations.
