Yes, the J-shaped outflow pipe mouth is submerged into the water... can also be halfway or slightly above the water level (if you prefer more surface agitation). The suction cup for the outflow pipe is positioned outside the tank to hold it in place.
You can buy spray bars for the filter too, most LFS usually stock various spray bar designs and lengths which are compatible with it.
Btw... since you are using a canister filter, consider switching to glass or acrylic lily pipes, looks way better.
Typically, the outflow and intake pipes are placed next to each other on one side of the tank, that creates as circular flow pattern which covers most of the tank area.. here is a diagram (just imagine the original green pipes instead of the lily pipes):

Source:
http://www.ukaps.org/index.php?page=...h-planted-tank
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