Horsepower is a product of heat. The EGT gives you an indication of where you are in the heat curve. As Harold mentioned it is a bell curve. As you lean out the engine the temperature will increase, peak, and start down the other side. If you are on the wrong side of the curve you are in trouble.
Like all tools, you need a full tool box to do the job. EGT is only one of the tools that you need. I think they are worthwhile for long pulls like Bonneville. Even at El Mirage they provide decent information. On a short run like El Mirage you can manage 1500 and get away with it.
The aluminum piston is going to melt in the 1200 range depending on alloy. But the piston actually sees much higher than the EGT indicates on the power stroke, like 4800 degrees. Then it gets cooled by the incoming charge. You get the average at the EGT.
The distance, type of thermocouple, open or closed tip, and other things keeps it from being an absolute tool. As a relative tool, being able to compare run-to-run helps.
At 1200 you are giving away HP. At 1300-1400 you are close. Over 1500 it better be short!
An oxygen sensor coupled with the EGT gives you a really good tool. The amount of oxygen exiting the engine should be zero. In a perfect world that would be the case. In the dynamic environment of the cylinder, you can't get a perfect mix of fuel and oxygen because of the short time for that to happen. Excess fuel is required to make sure that you get peak HP.
And that doesn't even begin to cover fun subjects like detonation, the effect of compression ratios on flame temperature, incoming charge temperature, humidity . . .
On the other hand, with a single thumper, run it till the valves float, then SHIFT.