As a designer on the roads you drive Lapham3, the first preference is to not have manhole covers in the driving lanes at all. We do our best to keep them out of the driving lanes if possible, but often that just is not feasible.
After that, the usual spec is that the cover is supposed to be 0.05 feet below the pavement surface (0.6 inches). Yes, this is a lot.
The biggest reason for that differential is to account for frost movement. The base of the manhole is located several feet below the road surface, and may or may not get frost in the soil at the base. The soils at the road surface will have frost in them (particularly since we plow the insulating snow off of them) and will move differently than the manhole. Setting the manhole lower gives room for the two to move at different rates and thus the plows won't catch them.
As far as mill and overlays go, I can say our budget is about the same it has been for years, but it goes a bit further than it did a few years ago. Even with that though, we are falling behind on pavement maintenance - that is to say it deteriorates faster than we are maintaining them. In the long run, it means we'll need to do more expensive full depth reclamation or full blown reconstructions instead of mill and overlay since we aren't keeping up.
As part of those jobs, the manhole castings are supposed to be adjusted to the .05' setting.