I see that this bug is about 13 years old.  I think there's a pretty
obvious solution: process-connection-type should default to nil.
Otherwise this is a footgun just waiting to happen for anyone writing
process-interaction code in Emacs.

But if we don't do that, we should at least document it.  See my
attached patch.

Btw, just to feed the fire, here's my own reproducer:

(with-temp-buffer
  (make-process :name "broken" :buffer (current-buffer) :command '("cat"))
  (process-send-string nil (make-string 10000 ?x))
  (process-send-eof)
  (sit-for 1)
  (cons (point-min) (point-max)))