"capacity fail" means: When someone completely runs out of mental or emotional bandwidth and visibly cannot handle one more thing — like a browser with 47 tabs fin.... This is a fairly neutral word with no inherent risk attached. There is no real cause for parental concern; it is descriptive vocabulary rather than something dangerous. If your child uses it, context will usually make the meaning clear. A brief, curious question about where they heard it is generally enough to know whether to follow up.