I always towed in PA-18s, both 160 and 180. I've never considered any of these(or any airplane I've flown, for that matter) to be overpowered. Until I can accellerate vertically with a 60x120 billboard behind me I don't think "overpowered" is possible. Banner towing in the summer was some of the most fun I've ever had flying. Never worked near a beach and we used 7 foot letters so I never towed below 1000'. We used to tie our banners up in bags and tie them to the bottom of the cubs to transport them around. Looked like Super Cubs with torpedoes. Spent 2 years in cubs and barely ever topped 1000', towing or just getting to a site, and I just don't think it was ever unsafe.
If you think 500' over water just off shore from the beach is dangerous, well, I can't explain it to you. When you're over water, in my opinion, 10,000' is the same as 1'. You're getting wet, wither way. But in the right airplane you could shed a banner and make the beach(or get really close) in 500' from what I've seen.
Towing is as safe as you make it, like every other kind of flying. I would never do it in anything less than a super cub or for the right guy.
Towing is one of those jobs that allows(forces, really) you to completely explore the range of the envelope of a particular airplane. It's not for everybody, but I'm a much better, safer, and more confident pilot for it. Besides, all that tailwheel time has opened most of the doors to some of the really cool flying I get to do in my spare time today.
Cornball alert:::::Fondest flying memory: Summer days in a super cub with the door down and the window up, freshly cut grass runway, and someone else buying the gas. It's amazing how many pilots out there just don't get it.