NiMH batteries have much lower energy density, both volumetrically and by weight. This means there's less energy to start a fire with when things go wrong - and to power your device with when things go right. They are also much less flammable internally - lithium burns real good.
Also, NiMH batteries generally just get degraded (in terms of capacity and general performance) when you abuse them, while lithium batteries often fail catastrophically.
One of the big issues with the Lithium batteries is that when they start a fire, they produce their own oxidizer
That is incorrect. They are indeed very difficult to extinguish because they pull oxygen from most extinguishing media (like magnesium fires do, only more) - but they do not carry or produce an oxidizer.