When is a bike frame considered too tall? I'm currently riding a road bike that feels too short for me. I use it to commute 17 miles per day. 

I recently went to a bike shop, and they told me that your ideal frame height is to stand over the bike, lift up the frame, and have no more than a thumb width space below the tire. They also said the frame is measured from the pedal axle to the intersection of the seat post and the cross beam. They said a 57cm frame was probably the best fit for me. 

I went home and measured my current bike and it was a few inches smaller. However, I have a few other bikes in my garage in need of repair, and I'm hoping to restore one if it's the right size for me. I measured one and found that it was an inch (~2cm) taller than my goal of a 57cm frame. I was able to stand over the bike with my feet flat on the ground (but the tires were flat). 

I'm wondering if this is an acceptable height. How tall is too tall? What downsides are there when the bike becomes too tall versus too short?
You can go as tall as you like. Have you seen those tall bikes that people must climb up a ladder to use? However practicality is another thing. As the comments have said - enough room to stand-over is a good start. Try getting a bike-fit, adjusting certain geometry (saddle hight, stem etc) may help in your circumstances.