I just changed the end links and frame bushings on my stock sway bar (7/8). They were really deformed.

My question is: How does the "tightness" of the end links affect handling? I know the spec calls for 18 lb/ft of torque but I was just wondering why because it seems so low to me. What kind of effect will a tighter setting yield?

As you tighten the nut down on the bolt, at some point the nut is going to run out of threads on the bolt & bottom out. That's where the torque spec comes in to play.