When do you say NO to your kids?

I was having lunch with my friend (who has a 1 year old also) and she said don't always tell your LO "no" because they will become a rebel. She reserves "no" for things that she really doesn't want him to do.

She said her MIL has a way to interact with her baby. I was telling LO to not pull the bag that contains to-go food (as I am afraid he'd drag the whole thing on the floor). She said if it were her MIL, she would go, "hmm, it makes a nice sound when you rub the plastic bag between your fingers, huh." Like, defusing his attention.

I tried to take her advice, but then after a few days when I say no (like, don't pull my glasses off my face!), LO starts breaking down and cry hysterically. I feel like man, even though I shouldn't say no all the time, I need to give him boundaries!! I am rethinking my approach.

What is your approach to discipline and the general "no"?