Even under high load pistons run cool. 400-500*F. There is a lot of heat transfer via rings to cyl wall. Oil from below helps cool, as does the intake charge. The combustion flame front is MUCH higher than EGT, but the duration is very very small, a few dozen degrees of crank rotation out of every 720. If you don't believe me remember that oil burns at ~450, and you can't have burnt oil/coke falling off the bottom of the pistons.
High EGT is hard on exhaust valves and turbos. At 752*F cast iron starts getting red. At 1000 red shows in daylight. The hotter these parts get the weaker their structure. Exhaust valves and turbines are special steel alloys that have higher strength at even higher temps, but they still have a limit. At extreme EGT they are the weak links.
As for melted pistons I have seen a few. Every one was some gas job that leaned out, didn't have oil in it, or had poor ring sealing. The latter lets combustion gasses get to an area of the piston that it shouldn''t be. The failure goes like this: the piston overheats, expands and make direct contact with cyl wall. With no room for oil a fast and vicious cycle starts - more heat, more expansion... till the piston skirt smears. This [almost] always smears the ring grooves. Blow by is still controlled by the direct contact so combustion continues. If you don't stop the piston seizes. Engine speed grinds down to 0. It that happens too fast something breaks. Sometimes a lot of things break. Afterwards [a not too dramatic event] if you shut off the engine it may never start again because the piston(s) contract and rings no longer have tension.
The [diesel] deuces are very well built and very conservatively tuned. For recreational usage higher limits may be ok. For me towing 14T may be more abusive than anything the army could throw at them (well, maybe not). I stay under 1000*F(post). If I went to 1050 for a few sec. I would not worry. If that sounds too conservative for some remember I would rather go sailing that rebuild an engine.
Here, again, is a good piece(s) on EGT. JimK
http://www.bankspower.com/Tech_whyegt.cfm
http://dodgeram.org/tech/dsl/FAQ/turbo_faq.htm