Re: My New PSU Works
No, since the PSU will only ever output what it needs to power the system.
The only down side to getting far many watts you need, is the power efficency. Power Supplys tend to work far more efficently the more load they recieve. So if your system is only using 500 watts for example, and you get a 1000 watt power supply, I can imagine that you'd be causing a slight bit more damage to your electric bill.
(Rectify me if I'm wrong with this)
As for the question on higher wattage = better performance; the answer is no. Not if you are giving your system enough wattage in the first place to power everything.
If you plan to overclock, some head room is required in the wattage to make sure you don't use too much (and thus, an overclock can increase performance), but most of the time, you won't see a standard, quite powerful system use more than 550watts.
I use a 550 watt supply, and I've had no issues, and I'd say my system is pretty powerful...
Abit IP35 Pro / Q6600 G0 / Zalman 9700 / 8800GTS 640mb / 4x 2GB Corsair XMS / X-FI Xtreme M / 1x 1TB / Antec 900 / Logitech Z-5500 / Samsung 20inch