I can't remember exactly what each short story is about, so I can't help you with that sequencing.
I read Local Custom and Scout's Progress first, then Conflict of Honors, Agent of Change, Carpe Diem, Plan B and I Dare. I hadn't read any of the chapbooks/short stories up to that point in time, so I was totally shocked when Daav reappeared in the Agent of Change sequence. I think I read Balance of Trade after that.
I actually liked reading Crystal Soldier and Crystal Dragon after the fact, because I could appreciate the backstory more - especially the Tree's - and it provided the tie-in to Balance of Trade with the appearance of Uncle.
Now I've read the short stories and am following the Theo arc.
I wonder if the series works as well reading it chronologically? Realizing there were short stories after I had read the novels was like being gifted with a box of chocolates.