I tweak them at the base, when they need it.
You can get them even tighter by tweaking BOTH leaves like you did on the left diagram.
There's not really a fit-all tweak though.
Crazy Climber is a good example of this.
You want the Up/Down really close, so that you get connection for a longer period of time while cycling the joysticks; but the Left/Right pretty sloppy, so that you don't accidentally put your hand off to the side while climbing straight.
As far as personal preference, I like them REALLY tight for Robotron, but pretty loose for Time Pilot.
The key to how tight to make them (to me at least) is how often you will need to reverse directions.
In games that require you to move in small circles, or reverse directions alot, you don't want to have to push the joystick a long way before anything happens.
Games like Time Pilot actually use the joystick ONLY at the outer limits, so a loose stick doesn't really affect anything.