Sentence Correction

HII TUTORS.....

When can we drop "THAT" OR "WHOM" from the sentences.......MSC guide(pg. no.106,chapter - modifiers) says one can drop "THAT " or "WHOM", when the modified noun is the object of the modifying clause.....I dint understand one bit of rule!!!!

The example quoted is :
"The movie THAT we watched yesterday was scary"....i used yesterday instead of friday
"The movie we watched yesterday was sacry"!!!

FOR ME.. THE RULE SOUNDS SCARY....LOL

Please suggest are the rules applicable to the following sentences:


1.) Few and short were the prayers (THAT) we said.
2.) The book (THAT) I read is a famous work of XYZ.
3.) I think (THAT) we should try.

SO MY QUESTION IS HOW DO I KNOW(THAT) IT IS TIME TO DROP "THAT" !!!

Kindly help...thanks in advance