too loose can be as bad as too tight. too tight creates too much friction on the whole bearing and it will over heat, too loose and the entire load will be placed on the bottom of the bearing and cause it to over heat. of the two, too loose is better, but its still not good.
I pack my bearings then tighten with a wrench while spinning the hub until it gets a pretty good amount of resistance. I then spin the hub 5-10 times to distribute the grease more naturally than the way it was packed. I then back off until it has play then tighten by hand while spinning the hub until it will spin ~3/4 of a turn with a reasonable spin.
again, if in doubt, a little loose is better. you can always make "test hits" then "read the bearings" like you would spark plugs. by that I mean you could pack them they way you think they should be then make a decent haul (an hr or so at highway speeds) then pull them down and see if you have caused discoloration on the bottom of the bearings. if so, try one hole tighter on the cotter pin.
on mine I like to see just a TOUCH of play when the wheel is off the ground and wiggled after a 20 min or so test drive. barely perceptible, but there is perfect to me.
as for grease, I use "green grease" its synthetic and waterproof (and easy to remember for future purchases). they claim that it is compatible with all greases... it has always worked good for me but there are TONS of other greases out there that will work just as well. More important than the type of grease this time, is making sure that you use THE SAME grease when topping off in the future. some greases are not compatible with one another and will actually break down into oil like consistency.