If you carefully dissemble a wall switch you will see a rather hinky mechanical switch where a small metal bar bridges two conductor posts. The bar is not "fixed" on either end. When the disconnect switch is slid left it lifts one side of metal bar, breaking the connection. The two conductor posts are notched on top when the bar sets, but over all IMHO it is a somewhat Rube Goldberg design.
Agreed. This is a very old design. I believe X10 was one of the first electronics companies to manufacture products in China (I read they actually built their own factory there). Because of that, it was probably cheaper at the time to design their own switch than it was to use an off the shelf part. These days it is cheaper to use an off the shelf part as they are also made in China.
If I had to make a WAG, my guess might be that using the disconnect switch to turn off a heavy load might cause minor arching, and after several times, to build up some carbon which could cause heat to build up across those contacts.
Be it carbon build up from arching, corrosion, or dirt, you are probably right in that the switch likely wasn't making good contact and started to heat up.
I don't know what presses on that bar to ensure solid contact.
There is a small, hollow, metal bulb with a small spring inside inserted into a hole in the slide switch. When the bulb presses on the bar outside of the notched post, it is like a teeter-totter and the other end lifts up, breaking contact. When slid back to be between the two posts, it presses the bar against the post, making contact.
A typical switch in one way or another uses spring tension to maintain contact pressure.
Yup.
I'm not an engineer, so this is only worth $0.02
I actually am an electrical engineer and can say that you are pretty much spot on.