You should leave at least a 1/4" of the batting sticking out from the top. This will help "stuff" the binding and make it firmer. Judges at quilt shows will look for a nice stuffed binding. Plus, if you don't have have your binding stuffed, it will fold in half and then it will start to wear along the edge and split, especially if it is washed a lot. Many antique quilts have split bindings just because they didn't fill the binding enough and they were used and washed a lot.