Flagstone Patio Questions

We have a 12' x 8' area between the house and the garage and will be laying flagstone down and will surround it with dwarf mondo grass, similar to what's pictured here:







Here are my questions:

The proper way to lay the stones would be to dig out 4-5", lay limestone, sand, then the stones. What I'm worried about is will there be enough dirt above the sand and limestone to hold water and sustain the mondo grass? I would imagine the sand would fill all gaps within the limestone when leveling, but I'd hate to plant all that grass to have it die out.

We have a drain in that area that runs under the driveway and empties into the yard via a French drain. Should I block off the drain and build the ground level up to the concrete where the water runs off or leave the drain? And if it is left in place, will there be any way to have it out of sight and still be effective? I'm thinking of just blocking it off.

Also not ruling out having gutters placed in the area, but that seems like it would be more expensive than its worth.

Thanks.