The article actually states that you should be at least 200 feet from a water source. "Close" doesn't mean right on top, just that you don't have to hike a mile for water!
My criteria for a camp site--(1) safety, (2) avoiding condensation, (3) comfort:
--Well off the trail, at least 1/4 mile, for privacy.
--Not on vegetation, if possible. Pine needles and leaves (unless poison ivy/oak) are great.
--In an area that gets a breeze (keeps bugs away), but sheltered from high winds.
--On a knoll, but not where subject to possible lightning strikes.
--Under a tree if the tree is healthy and not in a location subject to lightning strikes.
--Not within range of dead trees or under dead tree limbs. This is especially a problem in the Rockies where there is extensive bark beetle damage. You may have to camp in a meadow just to be safe! In this case, I don't set up the tent until almost dark and get it down early in the morning in hopes of doing less damage to the vegetation.
--If possible, not down in a creek valley or close to a lake, but up a bit.
--Level but not hollow in the middle where water can collect. I'd rather be on a slope than in a puddle!
In early season, it's better to set up on snow than on mud or on vegetation that's just starting to grow.
Note that some of these are contradictory! Sometimes, you just do whatever you can and grin and bear it!