The speed setting usually depends on the material you're drilling and the size/type of bit you are using.
Generally, metal requires a slow speed and wood can be drilled at a higher speed. Additionally, paddle bits and Forstner bits like a medium speed with slower speeds as you get to the larger sizes. I don't remember the last time I set the belts to the fastest speed.
I use my DP for both, so I just leave it set at the slowest speed, unless I'm doing something specific that would be better set at a faster speed.
You said the the motor has a multi-step pulley, the spindle should have one as well. It should be stepped in the opposite direction than the motor pulley. When setting up the belt, always use the corresponding groove on the opposite pulley. The belt should be level, don't use different grooves on the pulleys, as this will chew up your belt and pulley, and put added stress on the spindles.
