If the collective pitch rod, horn or nut should fail, you want the blades to default to max alfa/lift. Yes the helicopter will climb at max until it can climb no more (density altitude), but at least it won't crash. And you could in an emergency reduce rpm to get down, perhaps.
I don't think the blades will default to "max alfa/lift" . . . I think they will go to a near flat pitch position that given RPM still gives a little lift given the cirmumstances, if they went to "max alfa/lift" where would the force to counter aerodynamic forces come from?
I know of a Bell 412 which was almost new, flying offshore, that lost all "communication" between the pilots collective and the pitch change links, it was due to a failed bolt on the swashplate scissor, the 4 rotor blades went where the aerodynamic loads and the elstomeric bearings took them to, and it wasn't to "max alfa/lift", it was just close to flat pitch, the pilot flew close to the water with cyclic, lowered RPM's using thottle and ditched, everyone got out and when the boat came to pick up the Bell 412 it hit it and it sunk it.
Then we had the crash between two Bell 206's one of them went underneath the other and ripped the skids off the top one, in the process it completely broke both pitch change rods, the blades simply "defaulted" to something like "flat pitch", and the helicopter oscilated and sunk into trees, it's occupants survived.
I had also heard the story you mentioned, but I think it had take place in a Bell 47 or Hiller, and they used a swiss knife to stick it where the bolt used to be.