Edit: I am not advising anyone to deliberately do stupid things, simply mentioning that from my experience the builtin margin is fairly large.
A voltage drop of 25% could also mean you have semi-broken wiring somewhere, which can cause fires or shock hazards on faulty appliances.
You're understanding is correct, if neutral is allowed to float it's voltage will depend on ratio of the load on the 2 phases.
It also creates a variety of hazardous conditions and opportunities to make spicy metal.
You can play with it here courtesy of Paul Falstad and Iain Sharp: https://tinyurl.com/yq4lukm6
An RMS voltage of 230V corresponds with a peak voltage of ~325V so reading of 260V could theoretically happen.
260V is in +/- 10% threshold and is possibly falls within "engineered in tolerance" range, but will probably shorten the life of many appliances if supplied constantly.
Paradoxically, it may be the lower voltages that are more dangerous, because it will result in a higher current draw from all the devices.
Mains voltage has a nontrivial allowed range (in fact in Europe they increased it slightly so that devices would work across countries with slightly different original standards) but this is well out of spec.
But 170V... yikes!
