Currently, once you cross over your heat capacity, even slightly, you shut down automatically. If you override that, you start taking significant internal damage at random locations. It's both binary and random.
My change- expand the area beyond your base capacity. Represent that excess heat in a new gauge that would sit next to the current gauge, like so:

Instead of simply shutting down immediately as you cross into the zone, your mech begins taking negative effects.
There's three 'zones' as shown on the gauge. Each zone represents a negative effect that is inflicted upon you when you cross into it. The first zone sees your mech's maneuvering and top speed take a hit. The second zone sees your weapon cool downs increase. The final zone is really pushing it and will start seeing you take damage, starting from your ST internals and then your CT once the STs are destroyed. Finally, hitting the max excess heat level will see your 'mech actually shut down.
The point of this scale is to remove binary mech effects, so the level of the negative effect would start at 0% and increase as you push into the scale. Thus, at only just touching excess heat at 104% heat, you might only see a -10% movement penalty, but at 120% heat that might go all the way up to -40% penalty.
The exact values and levels would be up to someone that actually knows how to balance MWO, I'm just proposing the concept. I can envisage a set 30-point excess heat scale that would apply to every 'mech. While you can only see the heat percentage in-game, obviously there's your actual heat points in the background. The negative effects would have to be bad enough to seriously deter anyone from crossing into it without planning first.
Why?
- Most importantly, it removes the binary nature of overheating while still including negative effects that punish careless firing.
- It removes the randomness of taking heat damage. While I don't mind random mechanics myself, having your head explode because reasons at 101% heat is a little silly and hardly fitting for competitive play.
- It increases the depth and tactical flexibility of how you want to pilot your 'mech. Do you play it safe, or do you try to push it just that little bit more at the expense of having a very vulnerable 'mech while it cools down?
- It adds to the skill required in fire discipline because of it. It's not just a free ticket for an extra alpha, since you may just be setting yourself up for an early grave.
- Flamers become a little less frustrating if the defender can actually fire back, since the flamer is no longer fully stunlocking a mech at 90% heat. On the other hand, it's still being useful since it will likely lower the opponent's combat capability.
- It'll keep us BT purists a little happier since it works very similar to BattleTech's overheat scale.
But what do you think? The current heat system isn't really bad or inadequate or anything, I just feel like it'd be a great area to expand upon without being overly technically challenging (you'd think). The flamer changes have really highlighted it to me lately.