I'm wondering, what would make a certain motor "too powerful/large" for a build? Could software/firmware of FC/ESCs be a problem? The only thing I could come up with is strength of the frame and weight limitations. Just looking for anything a beginner might miss.
Power systems should be balanced. If you fit motors that can handle more power than the battery can provide, you're just adding unnecessary weight. That weight will reduce performance in all areas.
With electric power systems the battery is the source of the power, and everything else is little more than the transmission. If you want a 3 minute flight from a 4s1500mAh battery, that's an average of 60/3 * 3.7*4 * 1500/1000 = 444W, or 111W per motor. There will be higher burst loads but the motors have the mass to handle it. They'll heat up a little in the bursts and cool down in between.
If you switched to more aggressive motors or props you could increase performance in the bursts, at the cost of reduced flight time - and you might be pushing your battery too hard. If your battery is hot at the end of the flight, you're reducing its life.
If you push really large bursts through a small motor, there's a point where it will be less efficient (something to do with the maximum magnetic flux density of the stator, IIRC) so there is some benefit to larger motors but if your motors are cool at the end of a flight, you probably won't see any benefit from larger motors.
As far as I am aware, the main reason that giant motors aren't used on relatively small drones is power consumption. For example, look at an average 5'' drone using 2207 motors. In most cases, a 2207 motor can spin a 5'' propeller perfectly fine and adding a larger motor like a 2810 would just increase the power consumption without adding any real performance advantages. It would result in significantly shorter flight time in exchange for a very subtle performance advantage.
A motor is generally considered to be the "right size" when it is powerful enough to do what it needs to do without being so large that it is inefficient.
Another thing worth noting is that motor size will also be somewhat dependant on your ESC. For example, say you have a 45amp ESC on a 5-inch drone. That would limit you to a motor/prop combination that doesn't pull more than 45 amps for very long. So, while motor size isn't directly related to the current pulled, larger motors generally result in faster battery consumption.