I’m sure these have all been reported before, but just in case:
GAME CRASHES WHEN FRAGGING FRAGGERS: If you kill a Fragger with Overwatch, the game throws you to a ground-level POV and locks there. Reported via f12 a couple of times.
THE PISTOL GAMBIT: If you select Pistol and put your Squaddie into Overwatch, he will OW fire with his primary weapon rather than the pistol. This is currently a great way of getting your Snipers and Heavies to travel twice as far as they should do and still get to fire.
Given the importance of ammo conservation, I sympathise with those asking for some kind of Overwatch filter. Knowing how complex such things can be, I wonder whether a solution might be having 2 Overwatch buttons: Long Watch and Short Watch. If you select Long Watch, you will fire at anything that moves – but if you select Short Watch, you will only fire at targets within, say, 10 tiles. That way, Squaddies with inaccurate weapons won’t waste bullets on faraway enemies, but can still stay alert for those sneaky little Fraggers.