I use these preferences:
New Tab Open at: Last Tab (default)
After Close, Change to: Last Active Tab

This is perfect because:
1) Ctrl+T and the PLUS SIGN button do the same thing: create a new tab at the end of the tab bar.
2) After closing a tab, the last active tab becomes active.

Enhancement request: make the preferences sync using Firefox Sync.

I recommend another extension that complements this extension: "New Tab Beside": it allows Ctrl+1 to open a new tab next to current tab.