Hi Sparky,
Overtensioned belts increase bearing wear. This is correct.
What is the measurement of the belt? There should be markings printed with a letter (or letters) indicating the size of the V, and numbers indicating the length in either inches or millimetres.
Also, you say it's not slipping: Are you sure it's not slipping or is it just not squealing?
I normally tension industrial belts using the rule that you should be able to twist it 90 degrees with two fingers, but no more. 2lb x 1/2" deflection is not a huge amount, but an easy check is to twist the belt (WITH THE MACHINE UNPLUGGED). If it can twist considerably more than 90 degrees then it's too loose.
Also, depending on the wear on the V angle of the belt and the distance between the pulleys a bit of bounce may be normal. Check to see that the pulleys aren't worn too. I've seen hundreds of compressors that have had belts wear into the pulleys and instead of having straight V edges, they have rounded edges which means the belt is running on the root and not on the drive sides of the belt.
Take a few pictures and PM me if you need info. I've been in compressor field service for about 8 years and recips are generally pretty easy to sort out.
Cheers!
Danny