by saying when sh!t hits the fan you mean like in any normal situation a driver could be in.
So not so much that stretch tyres are bad and dangerous all you saying is you could end up in court if a accident occurs with these fitted so there not dangerous your just not covered don't really understand where your going with this tbh and why you have such a problem people were doing this in 80s and them banded steels were welded by them self didn't see that on the news banded steels stretched tyres is an old school new school thing some people just think if fitted you will die
or not 
The sh!t hitting the fan is where your insurance company ask for an engineer's report in the case of an accident because you are running a car with what many people see as stupid/dangerous modifications - if the engineer comes to that decision then your insurance is void - fill in the rest of the story yourself.
Banded steels were common in the eighties (they actually date back to the thirties or earlier but nothing that old could ever be cool could it?), yes, and they got clamped down on because of crappy welding was seen as the cause of several fatal accidents.
I think from about 1986 onwards they were made legal again or rather not legislated against and if you want me to quote the law relating to them - have a look at regulation 100 of the Construction and Use regs - to paraphrase it
'all parts fitted to a vehicle are not likely to cause a danger to the user of the vehicle or other road users. Additionally, you will need to ensure that the wheels do not protrude from the wheel arches, or that modifications are made to the bodywork of the vehicle to ensure that the wheels do not protrude.' Is that clear enough for you?
I have no issue with people modding cars, I have an issue with people so stupid that they think the law doesn't apply to them and so will push things to extremes because it 'looks cool'. These are the sort of bellends that end up with legislation being brought in which has an affect on all of us because governments never look at specifics, they just put a blanket ban on stuff.