I don't want to get into a spat here, but "generalize" is the correct word in this context, and "exaggerate" would not make sense in context.
One can "generalize" by discarding one or more requirements. For example, one can "generalize" the notion of a square by discarding the requirement that all sides be equal, or that all angles be right (yielding rectangles or rhombuses, respectively).
In this case, baeuchlein discarded one of the listed requirements ("if you look at [the gem] all hell breaks loose"), and in so doing "generalized" the description to encompass a broader set of fan missions. baeuchlein did not exaggerate the description---though it's possible baeuchlein generalized in this way due to an assumption that nuckinfutzcat was exaggerating and didn't literally mean that *looking* at the gem did anything.
Cheerio.