In the case of the hole burned in the piston, we need more info, IMO
I'm betting on some sort of fuel issue, b/c to see a holed piston is consistent with a fuel issue of some sort.
How fresh was the fuel?
Was there premix in the fuel tank?
Was the oil injection system setup and operating, or deleted?
Was the engine overheating?
Were the carburetors rebuilt, was the high speed mix adjustment at spec?
Was the engine experiencing any performance problems such as lean hesitation?
Were the spark plug insulators white (too hot)?
Were the spark plugs the correct heat range?
Was the engine being run hard (lots of heat), or babied?
What was the cylinder compression before failure?
Describe the oil puddle in the bottom of the crankcase, large enough to wet the crank wheels?
Was the squish band out of spec?
Is there carbon on the underside of the piston crown? (I bet answer is yes, I can see piston was overheated!)
In the case of lack of fuel, I want to point out that lack of fuel can cause detonation and excess heat. Excess heat will often lead to oil film failure. Thus as the logic goes, lack of fuel leads to lack of lubrication.
If the engine was running exceptionally strong and bouncing off the rev limiter, I'd have to say the high speed fuel mixture was too lean. If the fuel quality was old, stale or questionable then the octane was too low. Either of these can cause detonation (premature ending of combustion, maximum cylinder pressure occurring too soon during combustion stroke).