It's not that bad if you have one division too much, but the penalty increases quickly. For every division you have above the limit, all of your divisions will get a 10% combat penalty. I think the limit is 5 divisions (HQs count as divisions!), so when you have 8 divisions in a province, all will be at 70% efficiency. It's even worse for air wings, where the stacking limit is 1 air wing - which means that you shouldn't put more than 4 wings in a group. A group of 6 wings will perform worse than one of 5 wings!
Usually, the French and Belgian AI have problems with stacking, as they tend to put a lot of HQs and low-org divisions in one province, resulting in a -50% efficiency for those divisions that can fight. But this doesn't seem to be the problem right now (Seriously - what the hell are they doing? Your game is very unusual, homydog!).