Which way does the seal face on the leaky tach drive fix?

In a search of this board, I see a diagram of the seal mod with the lips of the seal facing up (when in place on the bike) but the description of the mod in the INOA Tech Digest seems to show the seal lips facing down (when in place on the bike). Facing up would seem to make more sense.

I seem to remember that garter (lip) seals - correct me if I'm wrong - are fitted with the lip towards whatever you are trying to keep in. So in this case, lip should go towards the crankcases.

That's correct - lips down, toward the crankcase.