Basically, they get either warped or else begin to wobble, and the friction snaps them into bits, sending bits of metal ripping through the engine, disabling it and rupturing it. The fuel does the rest.
As for the other stuff- my game has not crashed from any explosions so far.

I've had no random crashes, but a few bugs.

1. Enemy actors have a tendency to stop, look at the sky, and wait there, without firing at me.

2. Gold dig still messed up.

3. Weaker material settings on debris leading to squishy ground.

4. Door gibs rest instantly.

5. If you're aiming a TDExplosive and your arm gets shot off, the aiming reticle stays there.

Then how do you explain why, when you shoot the engine just at the right spot/time (on the outwards side of the engine, not it's axle thing) , it flies of it's axle thing?

Also it's really hard to armor plate things that FLY. It's hard to get them to fly, let alone stay in the air covered in EXTRA bits of metal.

Setting the timer to 0 and trying to set it lower crashes the game badly (gives you a error about your cpu )

This is easy to remedy (if timer <= 0 timer = 1), when making a very basic drawing program, when I added changeable brush size, if the brush size were set to less than zero it would crash as well.

the obvious answer is that it's a game and not real life.
it can do what ever it feels like, including having dropship engnes that blow up on touching a jetpack exhaust.

All that is very possible and all, but it sucks when you friend can destroy your 5 new ships with a single jetpack.

Bug: similarily to the door gibs, blood particles sometimes stick to other blood particles and result in a soft red mass that can fill up large spaces, especially when using weapons that generate lots of blood (like explosives)

That's been in CC for ages. Actually, if I remember correctly, that was fixed quite a while ago.

When the game slows down due to a large explosion, or fire, it sometimes freezes parts of the explosion, making it part of the scenery.

The bunker editor doesn't work properly in Campaign mode with a 360 controller. It skips every other category or item unless you hold it down to the point of rapid scrolling. Haven't tried it with a keyboard or mouse.

Also the options menu needs a restart button for when you change resolutions.

Some problems with the background in big resolutions, some of the background turns black.

Sometimes the console is invisible.

Also it's annoying when you're typing in a name in one of the game-editors, and you hit - and the console comes up. Freaking annoying.