I"m not sure how VLC internally handles gain based on the volume setting, but I have noticed that setting the volume in VLC above 100% sometimes causes distortion. It depends on levels in the source and also sometimes how different hardware devices handle gain. Of course, some sources already have distortion in them (bad recording, bad editing, etc).
I've noticed a lot more distortion can be caused by with certain volume settings in MPC-HC.
Dell's explanation is technically correct. If an amplifier is in clipping mode, it uses more power than if it's not clipping (can be demonstrated mathematically). Whether that exceeds the power an amplifier can handle depends on how the manufacturer rated their amplifier. Since speakers are often selected with ratings near the ratings of the amplifier, this means the amp may be outputting more power than expected. So the speakers may be seeing more power than they were selected for (or maybe rated for).
Modern amplifier chips generally have thermal limiting and other limiting that would prevent damage to itself from too much power. Speakers are usually very simple can be damaged by driving more power into them than they are rated for.
You would hope that everyone would know what distortion due to overdriving sounds like and have sense to avoid it, but alas that is not the case.
Sure, VLC output can saturate, but you can saturate doing the same by using your MP3 into audacity or by listening to Metal instead of Céline Dion.
VLC just uses the Windows APIs to output sound. At worse, you'll get a "castle" wave.
The truth is that their soundcard outputs power that are above what their speaker can handle. And this is their fault.
Maybe they should put on the warranty that one can only listen to "Céline Dion" and classical music...