Chemical Oxygen Generators enrich ambient air with Oxygen- You need a 100%O2 closed-system (as you have in the cockpit) before it would do any good at keeping contaminated air out of the Pax lungs. They are much worse off with an oxy mask on, thus unable to use anything to fliter the air, than they would be holding a blanket or towel over their face.
I don't think the small amount of Oxygen released would be a factor in inreasing the risk of an uncontrollable fire, but there isn't any point finding out.