What sleeping arrangements are recommended for a newborn with a cold and congested nose? Lots of people say pop a towel under the matress so their head is slightly raised but is it actually safe?

Red Nose recommends that all babies are placed for sleep on their back, on a firm, well-fitting & flat mattress.
https://rednose.org.au/article/sleep-baby-on-the-back-from-birth-not-on-the-tummy-or-side

If a baby is in a tilted cot, further hazards may be introduced into the sleeping environment.
When tilted, babies are more likely to slip down the cot and become completely covered by bedding, or if a pillow is used to elevate the baby, pillows become a suffocation hazard.
Therefore we do not recommend elevating the cot for sleeping babies.

Have you had your baby seen by a GP in relation to a cold & congested nose?