You won't get flamed for over-reporting since regular members don't have any idea if anyone is reporting. Reports simply go to the moderators of that particular forum.
You won't be banned if you report posts that are questionable or go against forum rules. I'm sure if you abused the report feature and reported 50 posts a day, or reported posts that didn't break rules you someone would most likely contact you and give you a gentle warning to stop.

I would say, though, that any post that violates forum rules is worthy of reporting.
I'm not trying to say that people should try to rat out other members, but the rules are there for a reason and it's up to a member's discretion whether they want to be involved in reporting or not. It certainly helps us out from a moderation standpoint. We can't catch every offending post.

Keeping Xbox-Scene clean, organized, non redundant -- and above all free of piracy talk -- is what's really important.