It does sound like the topknot is pulling on the skin if you are finding red marks. I usually take the end of my metal grooming comb and slid it under the band and pull it upward after putting it in. That way I know no hairs are being pulled to tightly.
I have found that the latex free grooming bands are much more gentle on the hair than the rubber ones. The rubber tends to catch those tiny hairs and break them off. Most nights I take the grooming band out and put in a tiny scrunchie to hold her hair over night. Never leave a grooming band in more than a day as the tiny hairs do start to twist around the band and it causes breakage.
toplinepet.com 
Amazon.com: Latex Free Dog Grooming Bands by...
Amazon offers other sizes and different color bands. I find the 1/4" size works well for us.
Using a good all natural conditioning spray on the hair and skin on a daily basis will also help.