This movement is usally most apparent when pedaling at high RPM's. If the side to side motion becomes a distraction the rider has reached the height limit. In general a rider whose is physically more flexible and who has developed and maintained a very smooth and circular pedal stroke can utilize a relatively a taller saddle position. Whenever a decision about saddle heght changes are considered it is important that the rider be observed on the bicycle while wearing the shoes and shorts they ride in. Different shoes have varying sole thicknesses and can noticably effect the final saddle height position.
Shorts can also have some effect.