Too hot to touch is generally too hot, but it's far from the temp at which you'll kill them.
As mentioned there are issues with the magnets losing efficacy over certain temps (which vary depending on the type of magnets) but the other consideration, and the reason you burn out a motor, is that if the current is too high, the windings get too hot and burn their protective enamel off. Without this the windings short and you have no more motor (and, often, no ESC as they don't much like being shorted).
A well tuned quad shouldn't come down too hot, but of course there are exceptions with hard flying, and extreme loading etc.
Those are different to the most common problem resulting in heat; tuning overload issues. These come from PIDs being too high resulting in the flight controller sending many rapid and extreme commands to the motors to change their speed. They can't respond that fast and so you get a lot of excess heat from the extreme currents and risk burnout as a result.