People who are "off" for mental or chemical reasons can be spooky. Being approached by someone in that condition can be unsettling. It's appropriate to have awareness heightened in such a situation. Being in a crowded or 'public' place is no guarantee that someone isn't up to something less than good, but it's necessary to try and observe and analyze the totality of the circumstances in the process of interacting with the person, even if the interaction takes only seconds or less to evolve.
Back in the olden days when I was still working for a living, terrorism was something of a new phenomenon. Back then, some authorities still looked at terrorists as one of three things - criminals, crusaders or crazies. Or perhaps some combination of the three. On the street, it seems to me that many of the absolute strangers who approach people are one of those three categories, or some combination, with a fourth "c" thrown in - cadgers, or beggars.
In some cases, you get approached by a plain ordinary person who needs help with something and is desperate enough to reach out to an absolute stranger. Many people are very reluctant to do that under ordinary circumstances. The last complete stranger who approached me was about a month ago, someone at the fuel pumps at a large, well-lit gas station, driving an unfamiliar rental car, who couldn't figure out where the button/lever was to open the hatch that covered the fuel filler cap. I was able to help, and we went our separate ways.
A genuine VCA (violent criminal actor) is likely to give any of several cues or pre-attack indicators* in making an approach. And the 'vibe' such a person gives off is likely to be subtly wrong and threatening as well. Tuning in to that vibe has sometimes been referred to as a 'spidey sense,' but it pays to be aware of it and listen to it.
Most VCAs prey on the desire of their 'marks' or intended victims not to want to be rude. Well, it's not necessary to be rude in order to indicate to an approaching stranger that he needs to slow down, wait, hold up, keep his distance. After all, someone who's going to victimize you isn't going to yell across the street, "This is a robbery, drop your wallet." They're going to want to get close. They're going to be focused on you, at the same time they're going to be looking around to see who else might be watching or in earshot. Any of the links below list more of the pre-attack indicators that might be a clue what this particular stranger is up to.
As to coping with such things on the street, the best source I know of is a guy known as Southnarc. His POI (program of instruction) on Managing Unknown Contacts (MUC) covers this stuff as well as anything I've ever seen. Search around on the web for his nickname, you'll find various videos and AARs from his classes that will help explain all this better. And if you can get to his class... take it.
As to how you did, I'd say you did just fine. I don't think you over-reacted in anything you did or said, perhaps your concern over this individual was greater than circumstances warranted, but still it seems you didn't "take counsel of your fears" and do something you shouldn't. Seems to me it was a good learning experience, and you've drawn some useful lessons from it. And I hope all this nattering has helped, as well.
*
http://www.policeone.com/police-pro...rs-Conscious-recognition-of-telegraphed-cues/,
http://www.martialtalk.com/forum/showthread.php?100897-Pre-Attack-Indicators-By-Marc-MacYoung,
http://www.self-defense-mind-body-spirit.com/understanding-body-language.html etc.