If your display supports 0-255, then setup is easy - set everything to 0-255 and you don't have to think about it.
If your display does not support 0-255, you probably should not output 0-255 from the video card (using madNvLevelsTweaker.exe) and will have to compromise.
The first option is to have everything set to 0-255, except for the video card output, so that on the output stage it is being converted to 16-235. This means that all content is kept at the same levels (desktop & video) but the conversion to 16-235 on output may introduce banding. If you are using your PC for more than just video playback, this is the setup you have to use.
However, if you are going to be using the computer exclusively for watching videos through madVR, you have a second option. What you can do is set the video card output to 0-255, and set madVR to 16-235.
This will avoid the potential banding from having the video card compress the output levels to 16-235. But it will make anything that is not video look terrible, as anything on the desktop will still be outputting 0-255, and all values above 235 and below 16 will be clipped. (very high contrast image with no shadow/highlight detail)
I would only suggest doing this if your are only using the PC for video playback, and are seeing banding from the video card outputting 16-235.