Clipping is bad in general, but often it doesn't really affect what you hear unless it is severe. I've never used CoolEdit but I've been using Sound Forge for at least 10 years now and I have extracted and edited quite a bit of music, so here are my thoughts for what it is worth.
1. The clip indicators in most audio editors (I assume CoolEdit would be similar) are simple 'over' counters. Basically that means that it defines clipping as N consecutive samples at max amplitude (0 dB). SoundForge appears to use a value of N=4 because if you generate a square wave at 0 dB, and select fewer than 4 samples, the clip indicators do not light. 4 or more and the clip indicator lights.
2. 4/44,100 is .00009 seconds and is entirely inaudible. I have tried to determine the shortest interval that is audible and the guys on the SF forum (most of whom are audio engineers) seem to think that somewhere around 6 ms is the shortest interval where the human ear can detect changes. Whether that is true or not (probably depends on frequency like so many other things), I really can't say I definitely hear a 'defect' in the sound when the clip indicators light up.
3. The caveat to the above is that on tracks where the clip indicators constantly light because there are LOTS of clipped peaks close together, sometimes it does sound like it is not quite right.
4. Normalizing (peak) simply adds a constant gain value to every sample. If for example, the highest peak is -1 dB and you choose to normlize to 0 dB, it will just add 1 dB to every sample. Likewise, if you normalize down - if the highest peak is 0 dB and you normalize to -1 dB, it will subtract 1 dB from every sample. Normalizing will not restore clipped peaks - the waveform will still be squared off - but now those 4 or however many samples in a row will be below 0 dB and the clip indicator will no longer light.
The only way to truly reduce the clipping is to use a plug-in like SF's Clipped Peak Restoration that basically interpolates the values of the samples to keep them below 0 dB. For small amounts of clipping, it is not worth it in IMO because as I said you can't hear it anyway because the interval is too short.
Instead of clipped peak restoration, you can apply the dynamic compressor or normalize to a specif RMS value (not peak normalization), but considering that the music is already highly compressed, the results often aren't satisying. I tend to just leave it alone.