Tightening the top cap with the stem bolts loose applies pre-load to the headset bearings. After you tighten the stem bolts, the top cap should be snug.

Since the top cap bolt is threaded onto the star nut (or expander), if you continue to tighten it, the stem isn’t going anywhere, but the star nut or expander can be pulled out if you just keep turning and tightening.

The first rule I was taught was to never try to tighten a threadless headset unless I made sure the stem bolts were loosened.

I once had a steel steerer tube that got wet and some surface rust formed on it that I didn’t see. I loosened the stem bolts to add more pre-load, but I just couldn’t set the pre-load. Eventually the star nut was at the top of the steerer tube. I should have realized the threads were going somewhere… lol!

John