is it possible to mod in an item called fireball launcher? that shoots projectiles that do fire damage?
As Vaiolis said*, but FYI there are two options for "fire" damage types: BURN and HEAT. The only apparent differences are the damage text, though HEAT presumably can ignite things. Several people have reported burning corpses, though live NPCs don't seem to catch fire.
*More or less, anyway. Make a copy of the [ITEM_WEAPON:ITEM_WEAPON_CROSSBOW] entry in item_weapon.txt, but rename it something like [ITEM_WEAPON:ITEM_WEAPON_FLAMETHROWER]. Then change the piece that says something like [RANGED:CROSSBOW:BOLT] to, say, [RANGED:CROSSBOW:FBALL] (if you don't mind the weapon being unusable by dwarves in Fort mode, change CROSSBOW to THROW). Adjust the other stats as you like.
Then make a copy of bolts in item_ammo.txt. Rename it as before to something like [ITEM_AMMO:ITEM_AMMO_FLAMETHROWER]. There should be an entry along the lines of [CLASS:BOLT]. Change that to match the launcher ([CLASS:FBALL] in this case). Change the damage type to BURN or HEAT (I'd try the latter).
The weapon now exists but is still unavailable. You'll have to add it to a civ. Open entity_default.txt and add a WEAPON entry for it to whichever civ(s) you like. Also add the appropriate AMMO entry. If you made it use the THROW skill, then not only will no NPCs come equipped with it (AFAIK), but the only way you'll find the weapon or its ammo is by creating it yourself in Fort mode (so you'll have to make some then visit the fort in Adventure mode to get your hands on it). If it uses the CROSSBOW skill, you should occasionally bump into NPCs wielding them.