Hands should be deep on the backswing to maintain the relationship between your hands, arms, and shoulders throughout the swing. The club should not go far inside of your hands, because doing so requires that you manipulate your forearms and wrists on the backswing, then manipulate them back on the downswing.
Watch this old chestnut of a Charlie Wi swing:
Notice that the clubhead doesn't go inside past his hands until the club is parallel to the ground.
If you can possibly afford it, a video camera is the best investment you can make for your golf swing.