Yes, the bores are all in great shape. No damage to any of the rotating parts, either.

The drain plug was clean as was the oil pickup screen.

What could cause the seat to disintegrate? Poor installation? Not having hardended seats installed?

When I had my 2.8L type four (2001 or so) I had about 40% of a valve head break off and wedge itsself into the top of a piston. I did a full race day with the engine like that and except for a bit of lost power the engine ran right along! The chunk of valve had laid pretty much flat. Every now and then it would do a huge backfire through the right side carb so the engine was pulled and after much thought we switched to titanium valves. I carry around the chunk of valve to this day. The valve seat was banged up too so the head went to Tuttles' for new seats.

Valve seats are intact on all cylinders so we are at a loss for where the debris came from.

My FIL believes that somebody inserted the pieces through the sparkplug hole.

Either way, we are moving ahead with putting it back together. I ordered new valves today as the intake in the offended cylinder was bent which is why it was not sealing.

All others seal fine.

magnaflux the piston for cracks look around the wrist pin areas as well as the top