Help needed with Bianca's Jacket

Swatch for Bianca's Jacket.

Before I start in and wander blindly through the corridors of another sweater, I could use some advice.

The plan: Bianca's Jacket from Interweave Knits Fall 2006. The yarn is the called for Sir Galli, a silk tweed in a butterscotch color, found at LittleKnits (thank you Joan) for a really good price.

If you've made this sweater, does the pattern run small or large?
And if you haven't, how do you deal with not getting the same gauge as the pattern calls for? Keep swatching? Stick with your gauge and change the size that you'll knit?

And, for any knitters out there, how do you know when your gauge is close enough? Do you go by the pattern, or by the way that the swatch feels in your hand? My swatch feels a bit loose and is coming out at 16 stitches to 4 inches, but it feels as if the structure of the fabric is too squishy. So, if I regauge and get more stitches to the inch, then where do I go with size? In stores, I'm usually an XS or S, and if you really must know my bust size, it's a 32.

Hmm. Notice that the swatch sort of matches the cat?
Does it show that this is a stressful week. I'm having surgery Thursday, and clearly much of my anxiety is being funneled into my knitting. Must Control Something, is what my brain is saying. Here's how I'm feeling:
The Cabled Bolero is going on extended rest for now, until I meet up with my sister or someone that it will fit, and can make some adaptations to the fit and the design of the collar.