Yes you can overtighten the headset. The top nut is called the Lock Nut.

Adjust the upper adjustable headset cup until the fork turns freely but you feel no play when you shake it up and down. When you've got that on, put your spacers on, then thread on the Lock Nut. When it gets down to time to tighten the locknut down use two wrenches as has been described above. One on the headset cup to hold it in place and the other on the Lock Nut to crank it down.

If you get it all cranked down and its too tight, loosen the locknut, then loosen the adjustable cup just a little and try tightening the lock nut again. Sometimes the added pressure of the lock nut drives the adjustable cup down a little too far so you need to compensate for it by having the cup a little too loose before you crank the lock nut down. It can take some trial and error to get it right.