I've seen this before. The calibration is allowing you to set the oven at 500 and reach 530 on the bake setting, but the broiler won't kick on until the oven cools to 500.
Do you have a link to someone who started a fire using the frozen towel (or sock) trick? As far as I can recall, the worst thing I've ever seen happen is plastic molding melting- or something to that effect, and I'm not even sure that it was this particular hack, but, rather, a cleaning cycle hack.
Whether or not this was responsible for a fire, I guarantee you that it wasn't in the context of what you'd be using the frozen towel for- namely, to keep the broiler on for a minute or two at 530ish. If a fire was started, it was someone attempting to push the pre-heat temp at least another 100 degrees, and most likely 200+ degrees higher. From a safety perspective, pushing the oven to a much higher temp than stock is apples and oranges to making sure the broiler kicks in.