Depends on the direction you want to go, compared to the wind (and wind wave) direction and strength. Most conditions, except fairly light, I would reef about half the sail or more.
Downwind is fairly easy just dragging your double paddle on one side then the other to steer.
Across the wind a single flat-blade paddle is best on the leeward side against the hull. I prefer one with a 'T' handle to turn, as well as push/pull to keep course. It takes a bit of practice, because if you over steer you will round into the wind or down wind and have to paddle both sides to get it back.
Upwind, you are probably better pedaling and using the double-blade paddle to steer.
Best is to pull up the rudder from time-to-time and try it on different tacks to see what works for you. Learning not to over steer will save you much time circling back around to get back on course.
I don't break many pins now, but early on with the early AI's I had lot's of practice in paddle steering!
- - - - - Hobie Island Sailing since 2006 - - - - - 2011 & 2012 Hobie AIs and a 2012 TI