simulate this circuit – Schematic created using CircuitLab
Figure 1. OP's schematic with addition of Vb and Vc test points for simulation.
The simulation results are interesting.
Figure 2. Vin, Vb and Vc.
... but when the positive part of Vin is applied, isn't VBE brought high enough to damage the transistor?
The base-emitter junction protects itself! Remember that the b-e junction is like a diode and will clamp Vb at about 0.7 V. This doesn't cause any damage because the current drive is limited by C1.
Furthermore, how does the diode create distortion? It seems as though any current that feed backs to the base is miniscule.
- When Vin goes negative the base is pulled negative and, interestingly, Vc goes negative because D1 pulls it down.
- When Vin goes positive Vc follows it until Vb gets high enough to turn on Q1.
- Q1 then saturates and the collector is pulled to ground until the input signal drops below the Q1 turn-on voltage again.
The effect gives a crude frequency doubling (and a load of harmonics) on positive half-cycles while leaving negative half-cycles relatively unscathed. The effect is dependent on the signal amplitude so I would expect it to be noticeable on the initial attack of a note at high volume and to die out as the note fades. At low volume settings there will be little distortion.