In general, the tighter the squish clearance the better. But, it can't be so tight that when the rod or crank stretches at high rpm that the piston smacks the cylinder head. The purpose of a tight squish is to set up some turbulent flow from the squish band towards the combustions chamber space near the plug. This helps to completely burn the charge. Also, the volume of gas trapped in the squish area gets cooled by the cylinder head, so this volume doesn't get burned and can contribute to a slight loss of power. You might see about 5% power loss (according to Gordon Jennings) with a larger squish clearance. My 3W-106 has .017 and .018" squish clearance with one base gasket. With two gaskets, the clearance is .034". I tried running it on two gaskets and lost a little power (100-200 rpm), although this changed the port timing too, so I can't attribute the effect only to the increased squish clearance.