Have you compression tested it? Are you getting any blowby? If the piston is broken, you'd think there would be a lot of blowby at a minimum. Other possibilities- valve hitting piston because a lifter is locking up or something? Exhaust valve hanging up and combustion popping out of the exhaust valve (a friend's LT1 actually had exhaust valves that didn't seal very well and let the combustion event pop out the port). I know nothing about the car so I can't be very specific.

On the plus side- time for forged pistons and rods, a metal head gasket, ARP studs, springs/retainers and a cam. Maybe a stroker crank too.