So these photos are fairly crappy but I think you can get an idea of what I'm showing. That gap in the top of the louver is for it to fit around the ridge beam, as Ed correctly assumed. The whole louver is sitting on a horizontal 2x4 that was placed in the framing at the appropriate height. We set the louver back in enough for when the 3/4" trim is applied to the edges, it will be flush with that rafter, as you can see in the next photo. I don't think there is any standard way to do this, we just thought this looked best.
Here the trim is on and I have caulked some of the joints. This looks crappy I know but I'll get a better photo when it is completely painted and all. It was just about dark and I was in a hurry this afternoon when taking these photos. Rain is coming and I wanted to make sure I had everything put up. Anyway, just a couple of other details you can't see: I stapled screen to the back of the louver, completely covering the whole thing, to keep out insects and birds. It would probably be a good idea to cover it with a layer of hardware clothe too, to keep out squirrels and such, as they can chew through thin screening. Since the screen is on the back, critters can still get up between the louver planks but you wouldn't want to see the screen.
Obviously, the louver boards are slanted downward to shed water, although I think rain will only reach this one on rare occasions. Also, any exterior finish I put up is primed all over before installation. Any trim, siding, anything like that gets one good all-over coat of paint and so you may have noticed that this louver was primed all around, inside and out, even though the inside won't show. Some may consider this overkill but I think it's a good safe guard. Moisture problems are one of the major repairs done on houses and so I go the extra mile on trying to avoid this in the future.
I went with spruce on the trim for a couple of reasons, mainly I was afraid I would not have enough of the cypress that I am trimming out the rest of the house in, so I chose to conserve that material. I should have thought about this and made sure I had enough cypress but I made a mistake. I didn't want to use pressure treated, like the louver itself, because it has a tendency to shrink and I don't want the trim to develop cracks in the joints if I can help it. Spruce (or fir) is a good straight, clear wood and I think it will hold up fine, especially being painted.