Argthtjtr

There's another reasonably common usage which relates as much to the audience as the work itself. A work which is "too on the nose" is one which gives an accurate view of the world that people won't like hearing, reading or talking about, and so will be unpopular.

An author who was beheaded for writing a political play which criticized the King of Smallandistan for beheading all of his critics could be described as writing something which was "too on the nose".

Assume "on the nose" means perfect - a positive connotation, as you've stated.

Too "on the nose" means too perfect. Which, as you've noted, connotes a negative.

Take a subjective matter such as painting. If you're going for freedom, expression of movement, light, etc., rendering something in too much detail can ruin the effect, in essence, the rendering is too perfect and therefore lifeless or absent of movement or subtlety.

An example of this is found in the later paintings of JMW Turner, e.g. Rain, Steam and Speed – The Great Western Railway:

Here, a lot of detail ("perfect" rendering) would have ruined the evocative effect of the painting.

An example might help. Here is a scene from the popular comedy Family Guy where Brian, the family dog, fears he is no longer wanted as a pet. He is talking to his owner Peter, as Stewie (Peter's infant son and Brian's best friend) comments acerbically:

            PETER

Hey, Brian, I thought maybe we could spend 

an afternoon together? 



            BRIAN

Really? That'd be great!



            PETER

Awesome! 'Cause I've got this new gun.



            STEWIE

Here we go.



            PETER

And I thought we could go deep in the woods.

Where no one would ever think to look.



            STEWIE

Oh, boy.



            PETER

And uh... just shoot it.



            STEWIE

Awkward.



            PETER

You know, like so far in no one can hear a 

gun fire.



            STEWIE

Little on the nose.



            PETER

Or screaming.



            BRIAN

Uh, I don't think so, Peter.

Although one can legitimately rationalize the OP expression, the disparity between on the nose and too creates significant semantic confusion.

Examples of how on the nose would normally be applied:

• 
  Not too high; not too low; just the right height--on the nose.


• 
  Not too far left; not too far right; in just the right location--on the nose.


• 
  Not too big; not too small; just the right size--on the nose.


• 
  Not too fast; not too slow; just the right speed--on the nose.


• 
  Not too hot; not too cold; just the right temperature--on the nose.


• 
  Not too hard; not too soft; just the right firmness--on the nose.


• 
  Not too much; not too little; just the right amount--on the nose.

Native speakers of English intuitively perceive a general connotation in the expression on the nose:

Not too extreme in any parameter of measurement.

Since too on the nose establishes an inconsistent comparison of an extreme, it would be more clear to identify the specific parameter of perfection and say:

It is too [specific parameter].

Examples:

• It is too precise.


• It is too focused.


• It is too measured.


• It is too literal.


• It is too unequivocal.


• It is too proper.


• It is too explicit.

In terms of writing, a reference that's "too on the nose" can mean a comparison that's so perfect in every detail, that it becomes too obvious and ruins the humor, similar to a comedian that explains their own joke.

You want to make a parody jab or allusion to someone or something, but you make the comparison so explicit that you kill the cleverness in it. It's so direct and obvious that it ends up being hamhanded and unfunny.

The phrase can mean something else that hasn't been covered in other answers.

It can mean that the speaker doesn't believe that the data in question is a spontaneous utterance, or believes that the "question" was written around the answer.

What is the human population of Earth? 7.2 billion

That is a bit too on the nose for it not to have come from Google. If I had answered the question spontaneously, I probably would have said, "something over seven billion".

The other definition of "on the nose" is when something smells fishy, pungent or otherwise off, either metaphorically or literally.

Someone describing art as "too on the nose" would make me think they were likening it to a cheap perfume too liberally applied.

I'm with @Moolric on this one: in 50 years of life I almost always heard or read "on the nose" in the Australian idiomatic context... in which context it means "off" (i.e., rotten, corrupt, odd, strange, 'shady' - sometimes literally, but most often metaphorically). "Mate, did you see that story about those ALP bigwigs rorting their expenses? Those buggers always strike me as being on the nose".

Another context for 'on the nose' (again, idiomatic) when someone places a bet to win, but not to place (bets to win or place are an 'each way bet'; betting $100 'on the nose' means betting only on the win).

Maybe Americans use it along the same lines as 'hit the nail on the head' or 'rem accu tettigisti', but I can't recall ever seeing it used that way.

'Too on the nose' jars me in the same way as 'different than' - another American usage - or people who say "the orange" without elision (i.e., 'thuh-orange' instead of thee-yorange")...

It can be intended to mean very (conveying emphasis). It generally means also (in addition, additionally), or excessive (excessively, etc.). I suppose in this case it would depend on how the person is saying it. In a sentence referring to art, they could mean; over the top (i.e. "that artist went overboard"), very much on target (i.e. like "right on the money"), or too redundant (such as; the artist going out of their way to accentuate every ideal or expectation within the artworks genre). I am not familiar with this phrase so I can't tell you which, traditionally speaking, if there is even a tradition in which it lies (lay, perhaps one is being put into motion now - joke).

I suppose it depends on the larger sentence, paragraph, and/or grammar. This is generally how you derive intent. If it was something you heard, then you must interpret based on vocal intent and body language.