There really is no such thing as "over leveling" in FF1. It all depends on how difficult you want the game to be for you. If you wanted a challenge, being level 25 at Kraken is reasonable. Level 30 or so is about enough to finish the game. If you build up to level 50 you will breeze through the entire game (50 was the highest level you could get to in the original FF on the NES).