Repotting Basil

I just recently bought a potted basil at the local farmer's market. I have pruned it once, harvesting about 10-15 leaves. The plant is gowing in a 6 inch (15 cm) plastic pot and it seems a little overcrowded. Also the roots are visibile, growing out of the drainage holes. I was wondering if it would be a good idea to repot my basil into a larger, ceramic pot. Also, since it is kept outdoors, I have been watering it daily. I hope that I am not overwatering it. If I am, are there signs of overwatering?

Roots growing out of the drainage hole are THE sign, that the plant may need a bigger pot. So go ahead and plant it in a ceramic pot, but make sure it has drainage holes. Putting a layer of broken shards as drainage in the bottom may be a good addition.
If the plant is being over-watered, it will probably start to rot at the stem base or become very susceptible to fungal or bacterial diseases carried in the overly wet soil. The only way to tell if the plant lost its roots because it became too dry or because it has been over-watered and the roots suffocated, is to keep careful track of any time the plant became very limp and may have lost the roots. If this never happened, but the plant is looking sickly and on inspection has very few roots, then cut back on watering! A good rule of thumb is to let the top centimeter (half inch)of the potting soil become dry before watering again. The smaller the pot the quicker this happens. Therefore with the larger pot, you will probably have to cut down on watering for a while, but in hot, dry weather this may not hold true and the plant should be kept in the shade for a few days.