The fast busy (or reorder ) tone is generated at telephone company level. Can a customer premise phone system OR bad phones lines create a situation where telco returns a fast busy back to the calling party?

Yes, if the phone system for some reason answers the call or other wise trips the ring and then immediately releases the line, the caller get get a fast busy.

Its possible to have bad phone line (the copper part) where the 90 volt ringing voltage shorts to the other side of the pair or to ground, causing a trip ring back to the C.O.

In both cases, usually the calling party will simple hear some clicks and then silence, but with some C.O.s they may hear a fast busy.