I think it is better to hold at a lower altitude. Fuel flow is a function of TAS, so for any given holding speed, your TAS will be lower the lower you are.....if you check the numbers on your aircraft, I am sure you will find the fuel flows lower at lower altitude(@ hold speed).
You mention the effieciency of a jet engine improving with altitude.....this is actually SFC that improves, which is a function of distance rather than time.
That said, I imagine that not many congested ATC units will give you a choice about where to hold, they will simply slot you into the queue and you go down in turn.
In terms of delaying or starting descent early, I(we) do neither. Just start the descent where the computer says to and that is that. Many times the hold is cancelled before you get there. It is however good practice to ask ATC if you may slow down, as you suggested.