This may be only partially relevant, but I'm reading about transformer protectors and I can see all sorts of things going wrong here. Extreme heat causes arcing in the oil and consequently fire and/or explosion, in transformers. I don't know how that'd work here.
Arcing is a problem with open air transformers too, and one of the functions of oil in oil-filled transformers is to prevent arcing. Probably this property simply breaks down at very high temperatures, but since arcing isn't generally a problem for computers in the first place, it shouldn't be a problem regardless of oil temperature.
> Arcing is a problem with open air transformers too, and one of the functions of oil in oil-filled transformers is to prevent arcing.
That's part of the reason for oil-filled transformers. The other reason is to cool the heat-generating parts by relying on a liquid's tendency to create convection loops between the warmer and cooler areas.
A quote: "Transformer oil or insulating oil is usually a highly-refined mineral oil that is stable at high temperatures and has excellent electrical insulating properties. It is used in oil-filled transformers, some types of high voltage capacitors, fluorescent lamp ballasts, and some types of high voltage switches and circuit breakers. Its functions are to insulate, suppress corona and arcing, and to serve as a coolant."
That's a good point. Yes, it does break down in certain specific conditions. This causes transformer explosions when there's overload and such. Of course, oil being oil only intensifies this problem.
