When do you cease to re-write work? Simple answer: when you are no longer improving as a writer, when you feel you have nothing more to learn, when you have achieved perfection. It is an unfortunate fact that some writers do believe this of themselves. They are normally the ones who have achieved success, and are drunk on the adulation of those who think a past participle is something you'll find in a linear accelerator.
For me revision of a story partially ceases when I feel I have achieved a required effect, might well attain publication, and have more interest in the next project. But while it remains in my processor it is still subject to a critical eye. I don't believe there is such a thing as too much re-writing. You just reach the stage where you can't go any further with a piece and move on to the next. In the process you jettison the bad and keep the good. You decide, and you base your decision on what you are after. Publication? Re-write for the market acting on feedback from editors and readers. Personal satisfaction? Don't kid yourself. For my novella for Club 199 I took a thirty thousand word story and extended it by ten thousand words to fit it within their parameters, and felt perfectly justified in doing so. As far as I am concerned good writers are successful writers (though successful writers often degenerate into bad writers).
There is no quick-fix formula. It is obvious such a formula is profoundly wished for, as the sales of the 'How To' books attest. When the questions are posed as to the extent and method of re-writing the real question being asked is: how do I write well? The first step on the road for ninety percent of would-be-famous novelists is to learn how to use the English language. Get hold of books like 'Fowlers Modern English Usage', 'Roget's Thesaurus', and perhaps a plain old 'Mastering The English Language -S.H. Burton'. For many people the re-write required is the one to turn their masterpiece into something intelligible. It was not until I joined some postal workshops that I found out just how bad it was possible for some writing to be. I also learnt that those writers who really try to get a handle on the language are also the ones who tell the best stories. Understanding the structure is all. You're not going to build a suspension bridge if you don't know how nuts and bolts go together. The rest is badly written soap-opera.
So now you know how the English language works, have put a story together, and are looking at doing a re-write. You have looked at the story objectively and made sure that the bunch of flowers is beautiful rather than are beautiful and your hero still has the same colour hair all the way through. How does it look subjectively? Where, for example, can you break the rules to the greatest effect? The best of writers are the ones who know how to do this. Steven Donaldson once managed a one word sentence that had the skin on my back crawling (Of course I'm aware that it is not pc to like Donaldson; he's too successful). The word was 'Kevin'. No, not the spotty dickhead down the road. Kevin Landwaster who performed the Ritual of Desecration and whose spectre has just stepped through a door from the underworld. I'm afraid no English book is going to tell you how to achieve the same (though 'The Critical Sense' by James Reeves comes mighty close). The only way to learn is through hard work, reading, and listening to criticism, though for the latter you must judge what is relevant. There are no substitutes for these, just as there is no substitute for talent. When you re-write you must see the images and feel the effects of every word. You have to decide what to discard and what to keep. There are many sources you can tap to help you make these decisions. But in the end they are your own.