Any question answered...

I believe (but will let someone more qualified than me answer definitively) that if the chain is too short, and you are in large to large ring/sprocket, then you put the mech under pressure which it cannot cope with, leading to it possibly failing- by snapping and then plunging into the spokes.

This is generally bad news, for the mech, wheel and frame. Possibly also the rider, if he or she was not expecting the rear wheel to lock up at that point.

I can confirm this.

I replaced my crank set with something that had a little more range, but I was too lazy to replace the chain. A few days later, the derailleur arm plunged into the heart of the rear wheel, necessitating the replacement of the cassette, chain, a few spokes, and of course the derallier (ultegra). It wasn't cheap.

I believe it's called "riding top to top" btw.