It really depends on the kind of sound you're looking for, but most will tell you to use light muffling only (usually a folded sheet or small pillow just sitting inside the drum along the bottom) just lightly touching the batter head.
I personally don't advocate the use of the "muffle ring pads"; rather, try looking into the Evans line of 'EQ' bass drum heads, or one of my personal favorites, the Aquarian brand with a 'built in' muffle system similiar to the concept you're talking about. The batter side is a 2-ply with a very thin felt muffle ring attached around the inside circumfrence, and the resonant head (facing the audience) is a single ply 'ebony-style' head with a 3" venthole and a unique, 10" muffle felt ring centered on the inside. Cool concept, awsome sound. I have never had a bad sound with this combo on ANY kit I played them on, and in many cases, they helped a weak, cheap sounding kit create a HUGE BOOM in the bottom register.
Good luck
