How does a sourdough sponge work?
A lot of sourdough recipes don't call for a sponge, per se, because the starter essentially already is a sponge. The purpose of a sponge in a bread with normal yeast is to allow a longer fermentation time and extra time for enzymatic reactions to happen in the flour before adding it to the final batch. This isn't necessary with sourdough the starter is continuously fermenting and reacting. 

And your guess is about right, if the proportion of starter you add is too high, the waste products and dead yeast cells in it can cause changes in the gluten that make it very slack and unusable.