While it is good to have as much MF as possible, is there a magical value where it is most effective, keeping in mind diminishing returns (If any?)
As you already mentioned "The more the merrier". But keep in mind that you should still be able to kill monsters. So if you go all-in to MF (almost) any enemy would probably be able to 1 shot you.
Concerning the diminishing return: yes, it exists but I don't know the exact formula to calculate it. Also, do not forget the Nephaelim Valor which you want to stack to level 5 which will give you additional 75% MF and 75% GF and bosses will drop at least 2 rares(1 rare in patch 1.03, but elite packs will also drop at least 1 rare in patch 1.03).