Too tight would be when the blood can't circulate properly.
I think it's a personal thing, but the drawstring is there to maintain the shoe on the foot, while still having the flexibility to point/flex the foot. In fact, a good fitted shoe doesn't really need a drawstring that much (it should fit like a glove). It's a final tidbit to make it really snug...
I personally tie it in a knot (to secure it), then a bow and I sew it in place. Once I have tied it to my liking, I don't find a need to touch it after that. I also cut the extra length, as they're usually too long and are sore at the instep (I sometimes place a bit of bandaid on top of it, to smooth it even more -to avoid the rubbing of the knot).