These are my current settings for the preamble, with comments. I'm grateful to people on the LyX mailing list and other lists for many of these settings.
% Include index
\makeindex
% The next line provides a latex command, "\blankpage", which I find useful
to do what it says.
\newcommand{\blankpage}{\newpage \thispagestyle{empty} \mbox{} \newpage}
% Reduce hyphenation
\hyphenpenalty=100
% This allows strike-through (if you want it), using
"\st{word}"
\usepackage{soul}
% To improve end alignment of lines:
\usepackage{microtype}
\tolerance 1414
\hbadness 1414
\emergencystretch 1.5em
\hfuzz 0.3pt
\vfuzz \hfuzz
% In one book I wanted little pictures and notes in the margins. I
tried using the LyX command "/Insert/Marginal Note" but it didn't work
well. Sometimes the notes appeared on the wrong side of the page and
there were difficulties using images. I solved this by setting the
marginnote package in the preamble:
\usepackage{marginnote}
% and this latex command in the text:
\marginnote{\includegraphics{foo.png}}