I would mount the blinds inside and put the curtain rod over the window. I think that's pretty typical. *shrug*

Well, it maybe typical but as I said DH is insisting that it be an outside mount. He doesn't feel that there is enough room for an inside mount and it is an argument that I will not win. So does anyone have any advise...

The placement of the curtain rod depends on many factors: size of the wall, placement of the windows, type of drapes, type of rod, and style of the room.

Could you post a photo of the wall, and another one of the room? Do you have drapes picked out? Are you planning stationary panels or drapes that open and close?

Think about what you want to see if the drapery is closed. In order to cover the blind header, I think you will need to mount the drapery rod above the level of the top of the blinds, or it will show. It may also depend on the drapery treatment style and hardware you have. If you are using clip rings to hang the drapes, or use tab tops, you will want to hang the rod so that the top of the drapery panel covers the top of the blinds header.

Be sure when you buy the drapery rod that it has enough depth in the mounting brackets to accommodate hanging the drapery over the depth of the blinds. Most of the time those can be adjusted or you can get deeper brackets, or a deeper 'return' if you are using a traditional traverse rod.

...going to have a valence or some type of topper to hide the blinds when they're pulled up? I think it would be nice for you to be able to make them disappear if you wanted. I'd love to see pictures too if you can.

The drapery rod would be mounted higher than the blinds, and go farther out to the side so that when the drapes are open they cover the edges of the blind.