Yes it can spit out of your dipstick and cause a fire. Overfilling it will put more pressure on seals and whatnot which could make them more prone to leaking. I overfilled the tranny fluid in my dd because its german and when I saw the dipstick looked a quart low, i added a quart. Well...since its a mercedes, they measure it in pints so it is now about half a quart full. I never bothered to drain it out though because the car has 300,000 miles on it and the extra fluid made the shifts more quick and I kind of like it.
-Harrison