It can, yeah... but not usually so suddenly without containment.
My own pure speculation is that it's a hydrogen effect, not just ice -> water -> steam. The report was pretty impressive, and it threw chunks large and small for hundreds of feet. I'm guessing the blast qualified as a low-order explosive, though it's hard to tell without a pressure measurement.
What could happen is if enough water was cracked, and possibly oxygen bound up in the iron as well, it would generate a hydrogen plume mixing unevenly with ambient air. Ignition source is right there, obviously. When this plume approached the right ratio, BOOM! Nice deflagration with a clear flame, something that fits the audio and video evidence.
But maybe not. I suppose it could also be the ice puddled, containing enough liquid water that a large chunk of it superheated and flashed to steam all at once. Seems unreliable, but who knows?
Jamie's observation was that the ice/water/steam might somehow trigger "aerosolizing" the thermite. I don't see that being reasonable, but it is possible that some similar effect is going on -- steam somehow helps melt or strip oxide coating from the metals and speeds up the already ongoing thermite reaction. I'd call this a long shot.
What would be interesting is to retry this (1) in an inert atmosphere, which would eliminate my leading hypothesis if nothing happens, and (2) in the presence of dry steam instead of ice, which if it does BOOM eliminates the second. Also might be worth trying with a regular bucket of water to see what happens. Better calorimetry, too, to see if atmospheric oxygen is contributing, will help a lot.