The "natural" riding position would be one with the following criteria:
Your knee never fully extends (locks out) when the crank is at "dead bottom center"; basically in line with the seat tube
You can sit mostly upright when on the flat part of bars. You have a comfortable slight bend in your elbow when on the hoods. You can reach the drops without your knees hitting your chest/stomach/elbows.
When in either the hoods or the drops there is little upward or downward bend in your back. Its just in a neutral, comfortable, position.
You feel no uncomfortable pressure on your perineum
Your knees are (relatively close to) over the pedal spindle with the crank arm level.
Obviously there are millions of ways to get this position depending on frame size, geometry, seat post height, stem length, handle bar drop, etc. Not to mention your personal flexibility and level of fitness.
To answer your second question, you generally know a fram is too small if you must extend your seatpost beyond the manufacturers limits or you must use a stem that is longer than about 130mm or with a rise of more than about 12 degrees.
Any of these things should signal that you are trying to make the bike "bigger" by adding length to parts.
edit: In regards to your comment about a "set back" seatpost, I would add this to the list of "ways you know a bike isn't the right size". You are effectively trying to lengthen the seat tube. Unfortunately, this will put your weight heavily on the back wheel and will effect steering/control.