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If you reach the limit your UPS (should) start alarming you about an overload, and if you push it too hard it will (should) shut down.But yes, you can't draw more than 650W from a 650W UPS even if it's on line power.
Absolutely. It's bad for the PC and bad for the UPS.What you don't want to do is have a UPS that is incapable of outputting the amount of power your PC is drawing. I've been there and it sucks.