Dear Mike,
You can do the small signal analysis(which is ac analysis) and check the loop phase margin. If you want to check with the step response.there is no point in cutting the loop. Remember that a transient is a real time analysis and in most cases, you put the same set up as reality in transient analysis. Of course in the step response, you should see atleast a second order settling in the output to your step input.(what i mean by this is that, your output should settle after 2 peaks max). This will ensure that your circuit is even stable in the closed loop conditions as well.
Added after 9 minutes:
Dear Mike,
I am sure that this document helps you...........It talks of Peak Overshoot and the phase margin. This is suitable for 2nd order systems, which most of our circuits fall in.