Hi,
Why would the capacity of a battery cause damage to an ESC?

I have a boat and the instructions said it can use a 2-Cell LiPo 7.4V (1500 - 3000 mAh). I had a 2S that was 4000 mAh so I thought that the capacity wouldn't cause any issues since it's still 7.4V.

Well needless to say, I almost lost the boat because the ESC malfunctioned and I had no throttle control.

Why would the capacity of a battery have an impact on the ESC? It's a 30A water cooled ESC.

Just a guess, but boats are generally very weight sensitive. Perhaps the extra weight caused too much drag, and that overworked everything? A smaller pitch propeller may be a solution.

I don't think it was that. Lipo's are generally lighter than a NiMh which is what the boat came with (a RTR) - a standard NiMh stick pack. That pack ran fine, but it's 2600 mAh.