In my experience this overconfidence as a result of politeness is true in my workplace, and in past workplaces as well.
Being generally polite, and not giving explicit negative feedback to annoying, unfunny, awkward, disrupting people finds justification in a kind of tacit, unconscious consent to be accepting and tolerant of everyone.
This works kinda all right, and makes it for a peaceful, sometimes even happy environment, and reduces the chances for conflict.
I have witnessed two scenarios where this politeness strategy fails utterly to both create a pleasant environment and to avoid conflict.
One scenario is that of a massively disrupting individual, who is not aware of the consequences of his words and actions.
Sometimes, like a current temporary colleague of mine, the guy is actually not a bad person at all, he is just not very perceptive of subtle signals (like awkward silences etc), looks very much emotionally vulnerable and unstable, which makes it undesirable to confront him about the issue, and has probably never been explicitly and seriously criticized for his disruptive behavior, resulting in a combination of fragility and overconfidence.
Responding to such an individual seems to cause problems whichever strategy is employed (honesty, politeness, etc).
The other scenario is that of a smart, socially-aware, perceptive, self-serving truly evil person.
These people analyze these social situations carefully and are able to detect these weaknesses in the social construct, and take advantage of them. They are therefore able to belittle, disrupt, take advantage of, subvert, out-compete their co-workers, because they know that if they are subtle enough, if they target their attacks carefully enough, nobody will directly accuse them of anything.
Note that I know that I myself have issues with detecting more subtle messages, and I know that my ego is vulnerable to lack of negative feedback as well. I try to ask people around me for truthful advice when in doubt, but in general I profit from this tolerant, polite social construct as well.
I am not sure about how to organize a better social construct that is both honest and peaceful and tolerant, and I am not sure it is possible to do it in a perfect way for all situations and for all compositions of individuals.
It seems to be a long standing problem with establishing and enforcing norms in societies.