I asked a co-worker who's into older "lead-sleds". He said people used to do this all the time because it looked intimidating. During the gas crisis, no one could afford to do it any more
Basically what these guys are saying is right. You run really really rich so all your fuel isn't burnt up. Then you mount a spark plug at your tip and it causes the flames.
Now, from those road racing cars where you see the exhaust flaming, I believe that occurs during downshifts. When they shift, they run really rich for a second and I guess they're running hot enough with straight pipes so the flames make it all the way through.
Do a search and you'll find ricer-kits for this. I vaguely recall something like this offered on the groupbuy website.