I am having the exact same problem with the battery bulging out my keyboard and touchpad. Dell wants $169.95 to replace it. This is my third dell computer and will be my last if they don't fix it.
Is this a fire or explosion issue to be concerned about??
Yes, there is. Get the battery out of the system and out of your home or office, now.
Then contact Dell - they're replacing at least some of these even out of warranty (the closer you are to a year old the more likely they'll replace it). If the system is two years old or more, the likely won't replace the battery.
Adding my response from another thread on the same subject as I'm in the process of addressing the same thing. en.community.dell.com/.../20019226
Just had the same issue with our XPS 13 bought just under two years ago, in exactly the same spot. For this unit I didn't opt for extended warranty and like you Dell wouldn't do anything other than charge me for shipping it in and then $80+ more for a used battery plus whatever else. I like others will be warning everyone I know away from Dell due to this. They have already lost one sale in the past week from my sharing of the story and should lose many more as this is a serious manufacturing issue, a safety hazard, and they treat it like it is simply a battery that isn't hold a charge in anymore. Can you image if that happened when you were traveling? You or your laptop wouldn't be coming home.
I'm sure you already took action but assuming you don't have any extended warranty from your credit card, the best thing for anyone else in the same situation is to immediately unplug the unit so it isn't charging any more and shut down. Find one of the videos on youtube that show how to take it apart as it is relatively simple. You just need a t5 torx bit/driver and small/tiny Phillips head screwdriver. Pull out the bad battery and find a new one. I ordered a an oem part from a ebay vendor for less than $50 but you can find some in the $30's with slight use. You can use your laptop w/o the battery while you wait but of course you have to be plugged in.