It's a bit hard to explain. It comes down to 'politeness'. In English, the more indirect your sentence is, the more 'polite' it is. Commands are given in very simple English. For example: "Don't eat that." is a very strong command. "You shouldn't eat that." comes across as being a little judgmental depending on how you say it. "You shouldn't be eating that." is so indirect that it almost sounds like you're pleading with the person not to eat it. However, it's still direct enough to be considered a suggestion. "I've heard that's bad for you." is about as indirect as you can be, but this level of indirectness actually annoys some people. A little-known fact about English is that we do have levels of politeness that are every bit as difficult as some of those East Asian languages we complain about learning. The difference for us is that tone is the most important part of being polite or not. Even so, the linguistic structures do exist. On here, for example, when people say, "That's wrong." it makes me cringe because it sounds so impolite to me. I would say, "It's not correct to say X." because it's more indirect and, therefore, more polite.

There is a difference between the two forms. 'You shouldn't eat ...' can be seen as general advice. It could refer to any person at any time. 'You shouldn't be eating...' is a direct criticism of what the other person is actually doing. If your friend is on a strict diet, and you go into the kitchen and you see him or her eating a double cheeseburger with mayonnaise, then you would say 'You shouldn't be eating that'.

+ ing form implies that you were eating that food by the time the advise was given to you . The later one is just a general comment of what you should not be doing .

To me it's just a matter of how snobby you want to sound when telling someone not to eat something. Both, "That's something you should not eat," and "That's something you should not be eating," sound pretty condescending to me. I also think that most people wouldn't say it like that. I would just say, "You shouldn't eat that." I don't think that sounds condescending and it's a lot easier to say.