I used to overstock all of my tanks until a pair of red isletas spawned when I was away for a weekend and came back with the rest of my 180 gallon wiped out. Interesting thing is that I have found them to be much more peaceful then the other amphilophus I have kept (except when protecting fry). It typically works as a way to spread aggression, but be weary, some fish become killers when they have fry in the tank. On the other hand, I've also had pairs kill each other when left alone together without dithers or other cichlids to take out their aggression on. I think for the most part its trial and error. However, some fish are hardier and better at getting along with others. Vieja and Amphilophus species seem to be strong willed and can take a beating, the festae I've kept have been very susceptible to disease when bullied or stressed. This may not be the case for everyone, simply my experience.
Ultimately, I like to be entertained when I walk by my tanks. That doesn't necessarily mean I need to overstock, but I'd rather see an overstocked tank then a tank where the fish hide all the time.