im a bass player, so what i usually do is get off the stage and ask the band to play one of those big ending crescendos, cymbals and guitars blasting ... i use that as a basis for how loud my bass will be.
then i let the singer sing while i check out the sound from a distance, and then that is how we set out overall volume ... it is really important to base the sound off the singer, although most of the time, your band's overall volume is pretty much dictated on how hard your drummer hits (the more control he has, the better).
you know its too loud when you cant hear the singer cause of the guitars - guitars are usually what causes volume wars. it makes the drummer hit louder, the singer scream/strain her voice and the bassist inaudible (poor bassist, he always ends up with the crappiest amplification known to man)