For the most part…bigger is certainly better (within reason). The downsides (slightly…and I mean slightly more lag) are most certainly outweighed by the up sides (more efficient cooling along with less pressure drop). Regardless, you will not be able to oversize a intercooler on a foxbody mustang without removing the bumper support, a/c condenser and possibly relocating the radiator.
I myself was able to fit a 12x24x3 (core size) intercooler with some minor trimming of the front fascia. I have seen others run the same size that still have the stock a/c condenser…but without it you should be able to squeeze a 12x24x4 (core size) intercooler.