I find it depends on the image. Last night, I was working on some older photos that were taken in very low light. Several weren’t exposed correctly, but had the composition I wanted. So how to fill in the right end of the histogram? I tried a few things like you did, Joanna, and found what worked best for me was to raise Smart Lighting to around 50, then highlights, and then either shadows or blacks - whichever keeps the contrast between light and shadow reasonable.
I think I would make the same choices for the image you provided as a test case. Raising only the highlights as much as you did (to 78) left the contrast too high (shadows are still underexposed), while Smart Lighting set to Strong raises the shadows and highlights nicely but keeps the contrast too low for my taste. I notice you didn’t suggest leaving the image like that, but rather, suggested Smart Lighting as a starting point for “making manipulation easier.” I think that’s a good approach, as long as colors are well preserved. Simply lowering midtones a bit after this (or applying some ClearView Plus, which usually lowers midtones in flatter parts of the image) would reach the result I like. There might need to be some manual lifting of the highlights after lowering midtones, as these ranges do overlap in PhotoLab.
Adjusting Contrast sliders after Smart Lighting can also yield some nice results - but I usually keep those adjustments small.
Smart Lighting can fail when the image is severely underexposed or when film emulations are used. (By design, the latter alter the histogram in a way that Smart Lighting doesn’t notice and therefore can’t correct). So sometimes adjusting Color Rendering sliders and settings is very helpful.