You've discovered the "Less is More" rule of cooking. I don't measure anything for my #2, but one or two small chunks (small defined that it easily fits in the palm of your hand) is all you need. Meat, chicken and fish absorb the most smoke when they're uncooked, i.e., cool. Once their internal temperature starts to go up, they absorb less and less smoke. When cooking ribs, if the wood chunks burn out in a few hours, you'll get just the right flavor. Since this is a matter of taste, you'll need to experiment to find what you perceive to be "perfect", but as you noted, too much smoke imparts a bitter taste into whatever it is you're cooking. Also, don't use fresh wood which doesn't create smoke easily and adds a slightly off taste.
My recipe for ribs in my #2 is simple. After preparing your ribs, put one or two small chunks (fits in the palm of your hand) of fruitwood in the smoke box. Put the ribs on a rack about 2/3rds of the way up. For St. Louis cut ribs, cook them for 5 to 5 1/2 hours at 230º. For baby backs, 4-4 1/2 hours. Use the bend test to check for doneness: pick them up with a set of tongs and they should easily bend and expose the meat. If they don't bend at all, put them back in for another 30 minutes.
I also want to reveal that I use an Auber PID controller to maintain a steady temperature. The Smokin-It's built-in thermostat swings 20-30º during a cook, which I found unacceptable. Using a PID resolves that problem.
One last hint. Soaking the wood in water prior to cooking is an old-wives tale. All that happens is you get steam. Use dry wood and you'll be surprised how it lasts and how much better your food will taste. Soaking wood in water is the same type of misinformation as putting oil in pasta water. (Use enough water to cook pasta and it won't stick together!)
Good luck with your new smoker and keep experimenting. You'll soon be the most popular guy in your neighborhood!