What do they mean by "the discriminator overshoots"?
Mode collapse happens when the generator outputs the same or a set of few images that always look the same regardless of different input noise values. This provides a very easy way for the discriminator to learn that the generated images are fake.
When this happens the discriminator loss is quite low (tending to zero) because it correctly classifies fake vs real images. The same occurs when training the generator instead as since it's trained by back-propagating the error of the discriminator, if the generated images are not able to fool the discriminator by reversing the class labels (due to images collapsed to few modes which are very easy to distinguish), its error is still low and so the generator's gradient tends to vanish, making impossible to let the generator improve and so to escape the local minimum. Indeed, when this happens it's useless to train further.
An ideal training is characterized, instead, by none of the two networks to overcome the other, meaning that for some epochs the discriminator is fooled (say $60\%$ of the times) and so the generator improves, then the discriminator gets better at classifying fakes (but still misses many) still giving the chance for the generator to improve in the meanwhile. If at any point during training one network (especially the discriminator) strongly overcomes the other, then the training ends to a poor solution: a mode collapse for example, that can even happen when the quality of the generated samples is satisfactory - instead, if such process continues and converges, the generator has reached the best possible quality (while also having a wide variety), while the discriminator is not able to distinguish true vs generated images: so its predictions are around $0.5$ probability, that is the Nash equilibrium (i.e. optimal solution) of the min-max game between the generator and discriminator.
What do they mean by "the signal magnitudes escalate in both networks"?
I'm not sure about this point but I guess it refers to a diverging training scenario, in which the gradient of both networks starts to explode because the learned features of the generator (corresponding to predicted pixels) are out of control. In fact, to overcome this issue the authors decide to normalize the generator's feature of each pixel to unit norm. They call this trick pixelwise normalization.