Ironically, ZEDs spreading fire by bumping into each other is the least expected and the rarest of this skill's effects. From what i saw back then, during the time i was testing this skill is that specific event (bump) occurs quite rare, even if it visually looks like ZEDs make a contact with each other it still does not register bump. Of cause there are exceptions - in close quarters, sprinting SC / FP, unreachable players etc..
The skill's other effect is that when you attack your prime target it creates an AOE around this target and applies damage to nearby ZEDs. Back then there was a bug where nearby ZEDs were taking this AOE damage as often as your target allowing you to wipe a group of ZEDs as it if was only one. TWI then fixed it by tweaking the way it works (adding timer, reducing check radius and some other changes too) but the issue with the main target still persists - with your every attack ZED as well takes Napalm damage as the same time and rate. Without taking resistances and damage bonuses on account Napalm does 7 points of damage, Caulk n Burn, for example, - 10 points.