The 21-year-old was back in dark blue jersey against Ireland in Dublin on Sunday after a year away as his national team responsibilities were disrupted by duty with the British and Irish Lions and a wrist injury.
But despite a bright start from the Melrose-born youngster, he could not inspire Scotland to anything more than a dismal display as they slumped to a 28-6 defeat in the Aviva Stadium.
His broken-field running talents have often sparked calls for him to be pushed up to outside centre or even stand-off in a bid to make use of his pace and agility.
Scotland coach Scott Johnson has already admitted he would like to give the Glasgow man a run at number 10 but his Scotstoun boss believes he is best staying put where he is when England visit Edinburgh on Saturday.
Townsend said: " Stuart had a superb game at the weekend, he was one of the best performers over the three games, never mind just in Dublin.
"It's good to see him back in a Scotland jersey and getting involved in play. He looked fit and was breaking through tackles which is fantastic for Scotland going forward.
"He has got such good basic skills - his passing, his kicking, his ball-carrying - but gets a lot of opportunities at full-back. You see often that full-backs are second only to fly-halves in the number of touches of the ball they get so I'm not sure you would see him any more involved than he is now.
"You see him getting up to become first or second receiver a lot of the time and that is what you want.
"He's playing so well at full-back right now so why would you change that?"
Townsend does not believe a change of position is merited but does believe Johnson should build his side around Hogg's abilities.
"Stuart got lots of opportunities at the weekend, but the more we can get him involved in play then the better it will be for Scotland," he said.
Duncan Weir, another of Townsend's Glasgow charges, was one of the few other Scotland players to emerge with any credit from the Ireland loss.
The fly-half has been encouraged to lead the Scots with more aggression and he showed signs of that as he took the ball on the flat with increasing regularity.
"Dunccy has worked really hard on his game and I thought he played very well," said Townsend. "He hadn't started the last couple of games for us but to go into that environment and do so well was a testament to the work he's been putting in."
Glasgow had nine players in the starting line-up against Joe Schmidt's side, with Pat MacArthur and Chris Cusiter joining the action from the bench.
And their club boss is certain they will shake off the disappointment of defeat to the Irish in time to do battle with the Auld Enemy.
He said: "All the Scotland guys will want to bounce back quickly. We showed in the first half in Dublin that we can go up against the best teams in the Championships. It's about taking chances and sustaining that level of performance for 80 minutes.
"You don't get any bigger motivation than playing England at home and the fact both teams are coming in off a defeat means the focus will only be higher."