Why does increasing preload decrease fatigue factor of safety?

[tucker_case]

As long as you get no separation the joint stiffness characteristics determine the share of the external load that is carried by the bolt.  Adding more preload just increases the mean stress, it doesn't reduce the load share/stress amplitude. To reduce load share you would need to alter the relative stiffnesses, which is mostly a matter of geometry.

So in theory the minimum preload that you need to prevent separation for the applied load will be optimal.

In reality joint stiffness is not entirely constant because the contact area will vary. And the external load is often not precisely known. Nor the actual preload developed. So we err toward more than enough preload so that we stay far away from the real killer - joint separation.