That is indeed where their ear canals are.

I have to imagine there’s some fanfic lore out there explaining how the Blueyverse is what comes about after humans destroy the world, and the dogs’ top-ears are just vestigial remnants while their functional ears have moved down (though I know there were some scenes where the kids pulled down their ears because of loud sounds – surely that could just be some leftover instinctual behavior)

Well now it’s troubling me, too! Thanks for nothin’, OP!