All setting priority really does for you is it makes sure that when that application requests time slices from the scheduler, it gets them, as long as the processes its competing against are running, and are of a lower priority.
The problem can happen, if the program you set to a higher priority, requests alot of time slices (or more technically, does not put itself to sleep), then your system may lock up because the OS wont get any time to do its things (process mouse movement, keyboard input, network traffic, hdd access), and your system can grind to a halt.
The only time i mess with higher priorities is running benchmarks, to make 'sure' that they get as many time slices as possible, and to complete faster.