Where on the window frame do I hang curtains?

Curtains are great additions to any room and can really add to the ambiance.  Before you even buy your curtains, you should consider how you'll want them to look when finished.  For instance, if you have ornate moldings or a specially shaped window, such as a bay window, you'll likely want to hang the curtains within the window frame to showcase these features.  If you want to make the window taller, hang the curtains from the ceiling or on the wall near the ceiling.  If you want the window to look wider, all you need to do is buy a curtain that will overhang about a foot on each side and mount the brackets accordingly.  All of these methods require different mounting techniques, most of which are similar to hanging a picture (i.e. drywall anchors and screws). 

Generally speaking, mounting the curtains onto the wood window frame is not a good idea.  If you choose to change the style of curtain rod or expand the width of the coverings, the holes left in the wood will be much harder to fill than those made in drywall.  But if you're looking to showcase your window moldings or specially shaped window, you won't have a choice but to pick a spot on the wood to drive a screw into.  Most interior window coverings are meant to be hung from a rod secured to the sides of the window frame.  For this, you'll need to measure carefully and drive a screw just once, so it's probably a job for a design professional because even if they mess up, they'll know how to fix it. 

That said, window coverings are inexpensive ways to spruce up a room, so have fun doing it.  The range of colors is wonderful and the effects stunning.