No explosions here...
My Nano recently decided that it's battery was far too small and decided to swell to about three times it's original size. Fortunately there were no sparks or explosions (I was in the car when it happened!) so all is well... sort of.
I originally thought it was down to a cheap in-car charger, though a dodgy batch of Nano batteries would certainly put that theory to rest.
There's some pictures of the battery here: http://speedyb.co.uk/comments.php?id=629