Back in the olden days and to be specific about that, it is about twenty years ago that I'm talking about, we used to fit bikes differently than we do now.
Top quality road bikes which were basically road racing bikes, were more uniform than they are now. To some degree, a 56cm bike from one maker was very similar in form to a 56 cm from another maker. Level top tubes were the norm. It was not unreasonable to have a number (bike size) in mind when shopping for a bike from most any manufacturer. Bikes nowadays are measured differently, more configurations exist and in particular, the same size frame can be called by different numbers due to measuring from different points on the frame.
This is the way we used to fit bikes: we used to fit the bike to the legs of the rider. Some people, especially men, come with pretty short legs (proportonally) as standard equipment from the factory. Common practice was to have the rider straddle the bicycle to determine which size of bike they would ride. For instance, a 6' rider with short legs could be assigned a smaller frame size than a 6' rider with longer legs. A typical reccommendation would be "you have shorter legs, so you take this smaller size of frame and we equip it with a longer stem to handle your longer torso." I no longer fit people that way. What we had going back then was a disservice to the short legged, long torso riders.
On men in particular, the upper body is where most of the weight is carried. A smaller frame with a longer stem was putting that weight further out over the front wheel. That doesn't make for relaxed handling and in the long run, it is not conducive to the rider's comfort.
Having the weight of the rider distributed between the wheels of the bike is the ideal situation as far as handling and comfort are concerned. A smaller frame with a longer stem puts the weight of the torso too far over the front.
To illustrate the effect of not having the weight between the wheelbase, I'll use an exaggeration. Imagine a little kid's sidewalk bike with 12" wheels. Take off the training wheels and set it up with a seatpost and handlebar/stem combo that is ideal for you. It is easy to picture how that would feel. We've already established that the bars and seat are in the ideal position but the main factor influencing the wacky feeling will be the fact that the rider's weight is not within the wheelbase. A too small frame has the same effect but to a lesser degree than this exaggerated example.
On a test ride, a too small bike can feel just fine. It is the longer rides where the bike fit makes itself known.
Even riders without the long torso/short leg proportion are more comfortable when not fitted to a too small bike. A common complaint with a too small fit is too much pressure on the hands and a cramped feeling in the neck and shoulders.
The seat tube angle on most bikes is within a three degree range and if you have a given seat angle, the estension of the seat post does not change anything. In other words, the amount of extension you see on the seatpost is not necessarily an indicator of good fit. What I look at is not the top tube height or seat post extension, or stem configuration, but the triangle of pedals, bars and seat in relation to the wheelbase. I wish I could tell you that I have numbers assigned to all this but I don't. There is a lot of intuition based on years of experience but I have not endeavored to make a "system" out of this.
Hardly a day goes by at the shop without someone asking what size bike they should ride. I figure that most of those folks have heard or read that the fit of the bike is of paramount importance and they want us to give them the answer. In the shop setting, first the customer decides which bike she/he needs; at this point, we can determine the size of that particular bike she/he needs. In the case of the buyer wishing to be armed with a number (size) to shop in the used market, there are too many variables to provide a simple answer.
Trends come and go. In recent times, the trend is to sell small bikes. Few of us should be seeking the same fit as a Tour de France rider. In general I see a majority of people on newer bikes riding too small bikes. Occasionally, I see someone on too big of a bike but it is easier (within reason) to make a too big bike fit comfortably.