Dropping ball procedure

When I drop a ball, and I'm required to drop it within a club's length of a required point, does this club length limit refer to the point on which I'm supposed to stand, or the point on which the golf ball must land when it touches the earth?

I understand it's then allowed the 2 club length's roll (not closer to the hole), and I understand that sometimes it needs to be dropped in a direct line and the club length rule doesn't apply, but don't understand where I should be stood when I drop it at other times.

You can stand wherever you want as long as the ball first hits the course within the distance in question (either 1 or 2 club lengths depending on why you are dropping)
As you say it can then roll two club lengths no nearer the hole, if it rolls forward or more than the two club lengths then you place it where it landed on the second drop.

From Rule 20:
A dropped ball must be re-dropped without penalty if it:
(i) rolls into and comes to rest in a hazard;
(ii) rolls out of and comes to rest outside a hazard;
(iii) rolls onto and comes to rest on a putting green;
(iv) rolls and comes to rest out of bounds;
(v) rolls to and comes to rest in a position where there is interference by the condition from which relief was taken under Rule 24-2b (immovable obstruction), Rule 25-1 (abnormal ground conditions), Rule 25-3 (wrong putting green) or a Local Rule (Rule 33-8a), or rolls back into the pitch-mark from which it was lifted under Rule 25-2 (embedded ball);
(vi) rolls and comes to rest more than two club-lengths from where it first struck a part of the course; or
(vii) rolls and comes to rest nearer the hole than:
(a) its original position or estimated position (see Rule 20-2b) unless otherwise permitted by the Rules; or
(b) the nearest point of relief or maximum available relief (Rule 24-2, 25-1 or 25-3); or
(c) the point where the original ball last crossed the margin of the water hazard or lateral water hazard (Rule 26-1).
If the ball when re-dropped rolls into any position listed above, it must be placed as near as possible to the spot where it first struck a part of the course when re-dropped.