It will almost always sound much, much better. You should always use less distortion than you think you need (unless its some sort of heavy metal.) I've also come to find that that "fuzzy" distortion, no matter how little you use, is very hard to get chords to not muddy up... and the more instances of it compounds the problem.
As a general "rule of thumb" (again, with the exception of heavy stuff) you want to be able to hear the individual notes when you stum a chord. Say youre playing an open E, switching to an Em. You would wanna be able to hear the open g string in the Em. Without the presence of that string, you wouldnt be able to decifer it being an EMaj, or m. Tube amps are great in this aspect. They are very "interactive" with your playing -- set the gain just right, and pick lightly and you'll get a light distortion. Pick heavy and you'll get a heavy one.
You can get it to work without a tube amp though...just mess around with the settings on your distortion, and eventually you'll get a feel for what I'm talking about.
