I like ours to be tight up to the diaper. We have a few that fit bigger, but the snug ones work best for us.
I never liked the looks of a string around the waist - it looks really uncomfortable!

 

I think it's a personal preference. If you're using fitteds, a little bagginess won't hurt. You could try felting it to make it smaller by running it through a hot/cold cycle in the washer.

 

It's personal preference, I think. I use mine over snappied prefolds/fitteds and like it baggy so he has room to move. It works great for us this way.

 

All of my 3 hand knit soakers fit tight to the diaper (fitted) and I like them this way. But it's a personal preference though

 

The ones that my mom makes for Colin fit snug to the diaper (but not stretched out) and I much prefer them that way. Also harder to snag while he is moving around the house!