Can anyone explain why the battery overlheats?

528mhz processor with no cooling provisions. When it's under load, it's both going to use a lot of power and generate a lot of heat.

The phone won't run without the battery. Using No2chem's power tools to monitor power consumption... I've managed to make the phone draw over 800mah, even over 1.2amps. Since the charger can only provide 1 amp MAX, the battery is in place to cover the extra power drain that the charger can not provide.

It isn't the battery directly that is overheating, it's the ambient heat from the processor and radio that gets tranmitted into the battery. It's not generating too much heat, there is just too much heat in the area.

I believe a back case designed to transfer heat from the processor out to the case will correct all of the overheating issues. Sure, the phone will feel hot as hell on the back, near the top, but at least that heat will be transmitted to the surface of the device where it can dissipate, instead of being trapped by the cheap, plastic, insulating back cover.