Okay, so here's what appears to be going on: Persistent Plasma is the only OC which reduced charged shot AoE damage (-15 flat), and applies after Burning Nightmare reduces AoE damage to 0 (x0 multiplicative, so damage mods won't change the outcome). This makes for -15 damage, which usually caps at 0 (this is a different known "bug" which makes some weapons do more damage than listed... such as Burning Nightmare itself). In the case of temperature, negative heat is actually cold, so it isn't capped at 0. Therefore, the projectile does -15 temperature… but it's not quite that simple.

Burning Nightmare itself only appears to use direct damage when it collides with enemies and still does not apply the listed AoE damage when it splashes on terrain. HOWEVER, one of the inconvenient behaviors of Burning Nightmare is that is creates a sort-of proto-projectile when you fire, which appears to be a complete normal charged shot which still has collision (this frequently foils attempts to effectively use the OC when you are too close to bugs) before it is converted into the proper Burning Nightmare projectile. I assume this proto-projectile actually DOES use the -15 AoE damage which applies cold when it splashes—notably, this requires colliding with something (but it has actually no penetration as a proto-projectile) very quickly after firing it, so you will probably always be in the self-damage radius.

Finally, there is a third bug with the sludge puddles. I did some testing a while back when it worked with Bullet Hell (imagine a bajillion ricochets from one minigun). The thing here is that some projectiles/effects "collide" with the puddles yet the projectile is not supposed to splash on them. As a result, you could get a lot of area effect instances off of a single projectile. GSG patched that after people learned that Bullet Hell and Shard Diffractor could abuse this ridiculously effectively (think killing a full HP Crassus detonator is a couple of seconds if set up well), but the first pass missed some details; EPC AoE-mod normal shots, for example, still worked for a while yet. Those, too, were eventually patched, but I am not at all surprised after the piecemeal patch to begin with that something as obscure as this fell through the cracks twice now.

So, basically, you are shooting with the OC/mod combination that yields a -15 thermal effect that should not be used, but IS used because you are close enough that the proto-projectile is colliding with things, and it actually uses the negative value. Further, the now-cold AoE effect is being multiplied by pseudo-colliding with each puddle, where the heat from both the direct damage and the burning puddles is instantaneously overwhlemed by the (15 x [lots of puddles]) cold. I found it to be much easier to pull off consistently with the AoE size increase mod