Well I don't know the exact formula, but I do know you get encumbered before you reach max carry potential. This is by design. Once you reach your max carry you will be unable to carry anything more. This is the way it was meant to be.
I think you get encumbered at 2/3 of maximum, IIRC.
at >75% <img src="/ubbthreads/images/graemlins/winkwink.gif" alt="" />
is that the RPG norm??? I could have sworn most RPGs it was 1 OVER the max. Perhaps a color coding system of sorts to alert you when you are near encumberence would be an idea.