The insulation in my loft is OK but I figure I could always add some more.The question is,is it OK to just lay it over stuff like cables and water pipes?
It is a worry, but most reasonably modern lighting should be wired using 1mm twin core and earth and if you are using low energy bulbs there's very little chance of heat build up, even if the wires are completely covered. Using
all of the lights on my upstairs circuit equals roughly the same wattage as just one old style 100watt bulb. I've covered all of my lighting cabling, but it's up to you to decide on what to do with yours. One thing to point out is that Halogen downlighters should never be covered, they get damn hot.
I can't see how you can over-insulate water pipes

GC