Although I agree that a drilled tank is preferable, there are plenty of people who've run hang-on overflows for years without problems - it can be done. By reputation, the more reliable ones seem to be the u-tube type. A quality unit like a Lifereef or something similar is a good choice (www.lifereef.com). Be sure to clean the u-tube(s) frequently as any algae build-up can cause problems.
As for tank or sump flooding concerns, a correctly designed system should not allow for either whether it's a drilled tank or using a hang-on overflow. Drilling an anti-syphon hole as Robert mentioned, or simply not having your return line submerged very far will minimize the amount of water than can be back-syphoned into the sump in a power-off situation. If you run the waterline low enough in your sump to accomodate whatever does syphon down when power is off, you won't flood the sump.
To minimize the chance of flooding the main tank it's the same principle in reverse. Figure the volume from where your water line normally runs (determined by the height of your overflow box) to the top of the tank. This gives you the volume that the the main tank could accomodate before overtopping in the event that the overflow box loses syphon or the drain line plugs.
Now, place a divider in your sump (from an inch or two under the regular waterline to the bottom of the sump) to create a chamber (that will normally be submerged) at the return pump side. If the drain line plugs or the overflow syphon fails, the return pump can only draw your sump level down to the height of that last divider - then it will just empty that last chamber out before it runs dry. If you place the divider so as to only allow the return pump access to a water volume that is less than the reserve volume you have in the main tank - no flood.
The only other concern in the event of a drain blockage or failed overflow syphon is your return pump running dry. This would happen whether your tank is setup as above or not. The above setup just eliminates the flooding issue. If you want to protect your return pump, you can put it on a float switch that will shut it off if the sump waterline drops too far, preventing it from running dry.
Let me know if that's not clear - I can probably post a sketch if needed.
HTH