Here are the options you have when you overfund for a 4 year public school.
1) You can go to a private school if you so choose.
2) You can make sure your grad school is paid for, even though I believe an employer should pay for that.
3) You can carry it into the next generation
4) Assuming your child has some scholarships, (s)he can take out the equivalent amount from the 529 plan without paying the 10% penalty. And since there is a good chunk of change that is taxed at the 0% rate (don't feel like looking it up right now) it's effectively tax free.
5) Your kid can take the money out as an unqualified withdrawl, intelligently, and pay 10% tax ... which is the penalty (instead of you taking it out, paying 25-28% plus a 10% penalty). 10% tax/penalty on the earnings only. That's better then your 401K will do for you.
6) Unintelligently have the child take out the money as an unqualified withdrawl, paying between 10 and 25% including penalty
7) You unintelligently take out the money as an unqualified withdrawl paying 35-38% of the earnings.
There's no reason not to simply use options 1-5.
As far as the extra money, not that most people here, including myself, say to max your retirement vehicles first, your regular savings, and your 'happiness' savings (2nd house, vacations, etc) before saving for 529. The question the OP has here is when to stop. Since you've already started it's assumed you're doing the previous things.
I'll keep the money in my control as long as needed. But if my kids work hard and get full rides (or partial) and that leaves money in the 529 plan, I will be rewarding them by allowing them to take out at least some of the money ... which may be taxed at 0% AND have no penalty.