The waistline is higher than the natural waist, and it won't come near your hips, trust me! All you need to worry about is getting the bodice fitting nicely.
As for which size, it depends on how close fitting you like it. I chose the size with finished measurements close to my bust, as I used jersey both times, and that should have negative ease. If you're using woven, you need to allow for ease.
Either way, there are no darts or other shaping, so it has to be big enough to accommodate your boobs, after that it just drops down a bit, then the skirt comes out horizontally.