Well, direct elections landslide with very poor proportional showing is rather unlikely, aint' it? However, some strange things did happen with the Left Party's East German predecessor PDS. In 2002, they got only 4% nationally, but won two direct mandates, which were thus kind-of-overhangs. But this distortion can't get too big, and again the PDS is the practical example. In 1994, they failed the 5% hurdle, but still got proportional mandates, as with winning four direct mandates, they cleared the alternative, so-called "basis-mandate" hurdle: winning three or more direct mandates.

The parliament is in the renovated Reichstag building, i.e. where the Bismarck era (and later Weimar era) parliament was seated. It has enough room for extra seats; especially since the theoretical minimum number of winnable seats was reduced from 656 to 598 (from the 2002 elections).

Regarding elections considered unfair: I don't recall a grave case, but there have always been murmurings over even small distortions. One thing I remember clearly was election night in 2002, when the result was narrow and it turned around during the night, and IIRC around midnight, there was a phase when it seemed the CDU/CSU got more votes but less mandates than the SPD due to the overhangs. (But in the end, SPD was ahead by a legendary 6.027 votes, and while SPD was ahead by 3 overhangs, the 8-seat difference of the potential coalition partners made the difference.)

*Traitor*, n.
A benighted individual who perceives an illusory distinction between serving his nation and abetting the criminals who govern it.