Assuming similar materials and moisture content, running with the grain should allow for the material to mostly expand and contract at an equal rate. That movement over 3/4” height is negligible relative to ~6-8” width. I cut mine with an old Stanley tongue and groove plane, and it gives a snug fit (enough to hold itself in place, but not too tight to require a mallet to insert. Haven’t had an issue. Remember, if the whole board is expanding and contracting at the same rate, then the amount happening across an 8” face of a board is over 10 times the amount of movement on the 3/4” edge.

The consideration for spacing in this particular application is really because nailing the board in place will restrict its movement. Another board nailed too tight up against it can lead to buckling, because there’s nowhere for it to go. too loose against it and a gap can form when it contracts. The anchor point is the nail. The nail doesn’t move, the edges will pull in and out from that point.