The easy way to check is to fret the string on just to the OTHER side of the second fret (i.e., the wrong side), and check the gap between the first fret and the string. There should be just 2-3 thousandths of an inch (I can eyeball it, but if you want to measure, feel free). Basically, you are turning that bit of the string into a straight edge.
In theory, the bottom of the nut slot should be at the exact height of the frets, but in practice it's darn near impossible to actually do that, and too low will lead to open string buzzing. We typically leave it just a few thousandths high.
Oh, and I always find that pencil method just doesn't work for me. I know lots of guys who do it, but the pencil wears to fast for me to get a really good read on things, and cutting to that line is always too high.
Light
"Cowards can never be moral."
M.K. Gandhi