K&N Filter Failure
 

The pop-off valve in my 78 had made some indentations on the K&N filter I was using. On closer inspection the filter fabric was torn where the flapper had hit the filter. This was allowing unfiltered air to pass through the filter. The fabric looks very delicate so this probably happens very easily. Back in went the paper filter.

i wonder if that is covered by the million mile warranty? good catch!

No, it's not. Another reason paper rules.

My K&N filter hasn't ripped there, but my engine doesn't backfire.
Oops, prolly shouldn't have said that, tempting fate and everything.

if you compare the K&N vs your paper filter you will find that the paper filter is actually less robust in that area. The K&N is cloth covered by a stainless steel mesh.
A paper element is, well it's paper. If you backfire it bad enough to rip a K&N you have more problems that what kind of filter you are running.

BTW how is your pop off valve installed? They are supposed to hinge at the rear and open in the front (of the car).
I've seen em reversed so that when they open they hit the filter immediately.