"Is the concern more for a fuel leak and explosion, or is it more about CO."
Well, the obvious answer is that, compared to not running the generator, all of the increased risks must be included into the decision.
Of the increased risks, CO is probably the one of most concern. On the other hand, a gasoline fire that starts in the engine room while the crew sleeps should be considered a "notable risk".
And before everyone jumps on me, it is true: people do this all of the time, and relatively few have had bad outcomes. My point is that the risk of losing the boat and/or everyone aboard is an important risk, and sleeping in an A/C'd cabin vs "au natural" is, for me, a very small benefit.
For me, the benefits do not outweigh the risks.