The show is performed multiple times every day in front of the Castle. It's only been showing since October 2001 so it probably hadn't started when you were there last.
As for a good spot, the area in front of the Castle close to the stage is my favorite spot. You have to stand, but you really feel like you're part of the show. If not, be sure that there are no trees blocking your view. You could miss parts of the show that take place in the towers of the castle like Peter Pan's battle with Hook if there are trees in the way.