Ok I got some news on the engine today... Mike over at XAT got the heads off and it turns out that the #1 Piston spun a Rod Bearing..or at least there was one at one time.
Looks like this was on account of the engine running lean and caused detonation in the number 1 cylinder.

Possibly due to the fact the car was stock and having excessive load put on it by a dyno run is what caused this. Factors such as Tuning, or lack there of, timing and fuel pressure all contributed to this.

The Crank does turn over and move freely once the #1 piston was removed, so it looks like the main bearings were not affected. The block will still have to be opened up, but does look buildable , so it will be salvagable for someone.

I hear WRX motors tend to run lean on cylinder #1 so that's probably an issue others may have encountered.
Heads were slightly warped, had them resurfaced and machined so should fit nice and snug!
No debris in the heads so it looks like the damage was limited to the block.

Car should be ready by Saturday. And hope fully Sunday.....a Snowman TUNE!!

p.s. its Jeff's (Snowman) 8th anniversary this weekend so give him a shoutout!