It's also pretty obvious that Russia respects only strength. If NATO doesn't react strongly enough, it is perceived weak by Russia, which increases the likelihood of them trying something against a NATO country.

I don't think shooting down aircraft that severely violate NATO airspace is overreacting. It's what Russia would do to NATO aircraft violating their airspace. I think everything Russia does should be responded with a measure of similar size. Being overly careful with Russia hasn't worked very well at all historically.