Philly,
Yup, we are still saying that the rotating magnetic field is moving slower than the rotor, so the machine is operating as a generator.
As to how increased flux makes the machine less efficient: let us consider a machine spinning at no load. The rotor is spinning at synchronous speed, and no torque is being produced. The bulk of the power flow is reactive VARs, where for part of the AC cycle each phase consumes power building up its magnetic field, and for part of the AC cycle each phase is generating power as the magnetic field dies down. There is a little bit of real power being consumed by the motor: the resistance losses in the wire and the core losses in the steel caused by the changing magnetic field.
In a perfect motor, at the no-load speed, losses are always zero and real power consumption is always zero. In a real motor you will have some power consumption even at no load. If you were to adjust the V/Hz of the motor in the no-load state, you would find that the losses change with voltage. As you increase the voltage, the no-load flux goes up, which increases core losses. Additionally, more magnetizing current flows, which increases resistance losses in the wire. Eventually you saturate the core, and losses start to climb even faster.
These are losses associated with creating the magnetic field. These losses happen even if no torque is produced. At any given drive frequency, the drive voltage is a dial which controls the magnitude of the magnetizing losses. The lower the drive voltage, the weaker the magnetic field and the lower the losses associated with creating the magnetic field.
When we run the motor to produce torque, we have a trade-off. The stronger the magnetic field, the less 'torque producing current' is needed to create a given torque. So that means that we can get the same torque with a strong magnetic field and a low 'torque producing current' or a weak magnetic field and a high 'torque producing current'. Well you have resistance losses associated with your torque producing current. You you can trade the losses associated with your magnetizing current and the losses associated with your torque producing current.
For any giving mechanical output (rotor torque and rotor speed) there will be an ideal drive frequency and voltage which will minimize the total sum of losses. You can get the same mechanical output with a different combination of voltage and frequency, but the machine will be less efficient. For example, you could raise the drive voltage, which would raise the magnetizing current and magnetic field strength, and increase the losses associated with creating the magnetic field; this would reduce the required torque producing current, and reduce the losses associated with the torque producing current. But we care about _total_ losses; any loss is simply heat in the motor. Raise the drive voltage above optimum, and for the same mechanical output the motor heats up more.
When the motor is operated as a generator, it is possible to make it so inefficient that the net output power is zero. Just raise the drive voltage enough, and the magnetizing current will get very high with lots of resistance and core losses. The motor consumes mechanical power (torque and speed), generates electrical power, and all of this electrical power is wasted creating the excessive magnetic field.
-Jon