A short circuit is a short circuit regardless if it's in the cable or the charger and how many times do I have to tell you that Apple's warranty doesn't cover third party accessories. This is a general rule with warranties, they only cover the item which warranty is actually for, whatever came bundled with it and nothing more.
A short circuit in the charger is actually preferable to a short circuit in the cable as the worst it can do is push a high charge on wires that are supposed to carry up to a 5A charge to begin with. In the cable on the other hand a short circuit can lead to 5A being lead onto data wires, which normally only carry a few milliamps and I don't think the potential damage escapes you there.
Melting is hardly the only way to cause a short circuit. Manufacturing and design defects are usually what causes short circuits on consumer devices and Apple most certainly isn't immune to this. The original T-shaped magsafe connectors had a pretty bad reputation due to a design defect that lead to the insulating plastic next to the computer end cracking and eventually completely falling off.
Seriously, no damage caused by third party accessories, specially ones bought from another store, will be covered by Apple's warranty. The only way I can see damage from third party accessories getting it covered by Apple's warranty is by lying that is was an Apple-supplied accessory that did that, but that's a can of worms I'd rather leave unopened.
Magsafe only protects you from damage caused by accidentally pulling the machine by the charger lead. It doesn't have any built in fuses like British power adapters.