Last night we started to take apart the engine to see how bad the damage was. We drained the fuel tank first, and suprisingly there was a lot of fuel left although I had been riding it all afternoon.
We diagnosed why it blew as well. The bike came with a stupid expansion pipe. These tend to make 2 strokes lean which resulted in extra heat that melted the piston. I'm guessing the jets were never altered to cater for the loud exhaust. Its a pain, but it should be fun rebuilding it. I just WISH this hadn't happened in the summer. Stay tuned for more progress.