gypsymoth,
Yes, the CG envelope lies between the forward and rear red lines (at the forward and rear wing edges). A FD designer will normally aim to get the CG within this range so that the aircraft balances properly with the minimum of trim necessary. If your CG is too far forward (beyond the forward edge of the envelope) then when autopilot is switched in, you will notice that the elevator trim settings are higher than they would be otherwise. Someone here described the flight characteristics as being like a shuttlecock, which was a good way of looking at it.
Another way to confirm that the CG is not right is to see what happens when you intercept the glideslope. A well-balanced plane will nose-down gently so that there is a smooth transition, but a nose heavy plane will dip its nose (alarmingly, sometimes). So control on approach is difficult, not to mention flare.
