I think outside will be much better -- at night, the infrared LED's would cause a glare on the inside of the glass, I think. Also, in the rain, it is a very good thing having the cameras outside, because then they are not affected by the water drops on the outside of the window, or the mist/moisture on the inside.
They need to be slightly away from the side in order to "see" straight behind the car. Since mine are mounted on the stock supports for the mirrors (I can still mount the mirrors for inspection, or if I sell the car) they show me vehicles that are directly behind me. When a large truck is right behind me -- I can see it in all three mirrors (both video mirrors and the rear view optical mirror).
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