You can take my testimony with a grain of salt, but I've been running thermal conduit beams on my corvette since they came out.
The -20% damage penalty does seem to disappear at about 70% heat, but at 99% heat, the beams only do about 20% more damage than the stock version.
I'd assume that the damage modifier takes a linear path where 0-40% heat means locks in at -20%, then from 40% heat, the damage scales up to 120% right up to 99% heat. Once you break past 100% heat, the damage multiplier jumps from 120% to 150% and stays there regardless of how much hotter the ship gets.
But that's just speaking relative to a stock beam. The Thermal Conduit beam displays damage that has already been reduced by 20%. From that perspective (if we call that base), the damage increases from 0% at 40% heat to 50% damage at 99% heat, then jumps to 100% damage at 100% heat. The damage essentially doubles from what is displayed in the stats menu.
This means that if you are really good at balancing between 95 and 100% heat, you can get a slight damage boost between 15% and 20%, compared to stock, without ever damaging your modules. You can also work between 100% and 105% heat carefully to get a much greater benefit, so long as you fall below 100% the moment you stop firing. As long as you spend minimal time overheated, you can safely work through a 108 kill massacre mission before things start malfunctioning. At this point, you can run AFMs if you want, but it's practically just as time efficient to dock and repair since two 5A AFMs repair modules in about the same amount of time.
However, when it comes to plasma, the mod is almost completely useless. In order to get the damage boost, you have to fire them when you're already in the hot zone. Regardless of your build, you're likely to shoot up past 150% heat with your next shot. You can't fire them continuously like this, even with efficient plasmas. You will destroy yourself very quickly without much gain.
