You attach the curtain rod to the wall, making sure that the rod extends far enough out so that the curtains clear the blinds.

Your best bet is to get a decorative rod so that when the curtains are open, the exposed rod is not unsightly. Hopefully your blinds have a valance covering the top.

The old white traverse rods are not being used as much now. Is that what you had planned to use?

Also, drapes are being hung almost at the ceiling these days.

Have you already purchased the rods? If not, search for rods that offer (at a price, of course)an extension for the mounting bracket. If not available, you will have to get creative: paint a block of wood to match the wall,secure it to the wall and mount brackets into the wood. Make sure you know how much you need that rod to extend to clear the blind mounting hardware.

I haven't purchased the rods, but I'm wondering, do I hang them above, below or right in line with the horizontal rod for the blinds?

No matter where you hang your drapery rods, they still must be out from the wall enough so that your drapes hang in front of your blinds. Ratherbesewing gave a good suggestion if you can't find rod holders that come out far enough. As far as where to hang the rods, that is up to you. Personally I would put the rod right in line with the horizontal rod for the blinds.

I have the same setup, with custom made and hung drapes from JCP. They are pinch-pleat, hung on a circle hook on a fluted wood rod. I asked them to hang them so the bottom of the pleat is in line with the top of the wood blind. They measured and mounted them on brackets that extend past the blind. I'm very pleased with them.

I know there are some issues with the hardware on my blinds...long story, don't care, they are what they are.

Anyway, here are pics.