My rule is to rewrite if it isn't working.
I wound up rewriting the beginning of Pay Me, Bug! five or six times because I couldn't figure out why it wasn't working. Something didn't click in the story and I couldn't get past it. The version that's up now isn't really that different, or much better than, the version that was in the original draft, with one significant exception -- this time around the character of Amys (the protagonist's first officer) finally clicked for me, and suddenly the entire story was whole enough for me to be comfortable enough to go forward with it. (There are still problems with the story and parts where I am unsatisfied, but not to the point where I want to chuck the whole thing.)
Sometimes you have to do that, and it can get to the point where you're afraid you're picking your story to death. By the fourth rewrite I was convinced I was picking apart the beginning of my story, but I still had a gut feeling I had to fix something. By the sixth rewrite, I think it's fixed to the point where it can be used.
I have another story I'm going to be posting-while-rewriting where every chapter I said to myself "yeah, this needs to be reworked" and I put it aside to finish the story. This is going to be a little more interesting of a project since I'll essentially be rewriting it "as I go" and I'm not sure how that'll pan out. But as it stands now, the story is a good but the way it is currently told breaks the story. It needs a rewrite, so I'm going to do it.
There is one other in the hopper where all I have are eight chapters. (That's going to be my "high wire act without a net" project). That will be impossible to rewrite because after eight chapters it'll be posted live. I'm not sure how I feel about that. That one might go down in flames.
What Heinlein is saying, I think, is that you need to resist the urge to make it perfect, because (to borrow a cliche) "perfection is the enemy of the good." But that doesn't mean you're enslaved to your first draft...