Down to business.
Dialogue Balloons are good, and you should use them in your comic. They are an unfortunately imperfect tool for representing speech in an image, but they are the best tool we've got.
So don't try to get away with half-assed crap like this.
I hope I don't have to explain how terrible that looks.
Here is how to properly operate your dialogue balloon.
Balloon versus Text
As I said in Text Triage Unit No. 2, you should make your balloon big enough to give the text some breathing room around the edges. Don't vacuum-pack your text.
Balloon versus Panel
Panels should never be more than 40-50% filled by a single balloon. All that white in one area is visually jolting, and distracts the reader from the image. So don't let this happen.
If you use multiple balloons, though, you can get away with cramming a bit more text in.
That's not a perfect panel, but it's a workable one.
The standard balloon shape is somewhere in between an ellipse and a rounded-off rectangle. You should adhere to this standard.
If you use an image editor to letter your comic, be careful with the ellipse tool. If you square up your text well, putting an ellipse around it will work just fine.
But if you have a long narrow line of text, it can look very awkward.
It's amazing how many professional comic artists and letterers still haven't realized this.
Non-standard balloon shapes (like squares or wiggly blobs) are inherently distracting, and therefore best used only when you want to draw attention to a particular "voice." For instance, if you have a robot character, using perfectly square balloons for its speech would convey a rigid, synthesized voice. You could also use square balloons when a human is talking through a machine such as a phone or a radio.
Or, you know, whatever.
Do whatever you want with your balloon tails. As long as they're pointing in the approximate direction of the speaker's head, I don't really care.
The line bordering your balloon should be thick enough to see, but not so thick it's distracting. 1.5 to 2 times the line weight of your artwork is a good guideline. It should also never be thicker than the panel border (unless of course you used a borderless panel).
Borderless balloons are also a viable option, as long as they're clearly distinct from the background.
Should you allow balloons to overlap your characters, or not?
There's no correct answer. Manga artists have no problem with overlapping. Western artists typically avoid it. It is up to you to decide.
Personally, I think that keeping characters and balloons rigidly separated also keeps your readers more emotionally separated from your comic, because it limits what you can accomplish with close-ups. But you should go with whatever makes you feel comfortable.