Can an arcing switch damage the breaker or cause a fire?
Arcing is not a good thing for the switch but it won't damage a standard circuit breaker. If the switch contacts are held at a point where they arc the arc starts damaging the contacts. With a older possibly Mercury switch where there is a glass tube with Mercury the arcing if held to the point the mercury vaporizes I have seen the glass tube fracture so a new switch was needed.