I would posit that there are indeed degrees of exaggeration, but all of these degrees are to excess - if we may once again equate the word with "overstate" for illustrative purposes, we can see this more clearly. For instance, a slight exaggeration is slightly in excess of the truth; that is, to exaggerate slightly is to overstate slightly, which is to state as slightly over [whatever actual value]. Or, in the other case, to exaggerate greatly is to overstate greatly, which is to state as greatly over [whatever actual value]. The issue arises, however, with "over-" and "under-" as prefixes, since they indicate a certain excess, "too much" or "too little", respectively. We have, however, "to exaggerate" as "to overstate", which is "to state as too much", and "to overexaggerate" as "to overoverstate" which would thus become "to state as too much too much" - the question arises, is it possible "to state as too much enough" or "to state as too much too little"? Surely, if we are overstating at all, we are already in excess - too little of this is no longer excess at all, enough is absurd, and too much is redundant.