Is The Clutch Cable Too Tight??

If you still have the stock quadrant / adjuster, then you adjust it by simply pulling up on the clutch pedal (usually not needed unless you've replaced the clutch since it's self-adjusting). If you have an aftermarket quadrant and firewall adjuster or adjustable cable, then you do want some slack between the throwout bearing and the pressure plate. Adjusting it until it touches to get rid of the chirping is just fine though, it's the same thing the stock quadrant self-adjuster does. That's why your throwout bearing gets noisy well before the clutch is worn out on our cars.

If you want the throwout bearing to last a lot longer without chirping / chatter, the best thing to do is adjust it with some slight slack and also put a return spring on the clutch fork to keep it from bouncing around. They used to sell a nice return spring kit for our cars but I can't find it any longer. Luckily some folks have put out DIY instructions to make your own. http://www.mustangevolution.com/forum/f280/t272375/