Take a flashlight and take a good look at the harmonic balancer while it is idling. make sure it hasn't spun out. If it has spun out it will be wobbly looking and will result in a lot of the symptoms you describe though it won't really hurt power too much.
If you aren't getting any ticking noise then I doubt your valves and pistons hit.
The reason I tell you this is because I once spun out my balancer shifting from 4th to 5th. Problem was I shifted from 4th to 3rd by accident
and when I let out the clutch the engine overrevved. When I came back to idle it had a bad lope like a misfire. I played with it for like two days, just idling it, checked the plugs and wires, all those things. THe car was really new, only about 18K miles on it. I really thought I bent a valve from the overspeed and figured I'd had valve float and that one or more valves kissed a piston.
Well, I was standing over it at the end of day two and happened to be looking down and saw the crank pulley wobbling pretty good. I got a flashlight and saw that the outer ring had some significant runout. So I took it to the dealer and told them what I observed and how the car was running.
They changed out the damper and the car was fine.
So your theory that he hit the fuel limiter is a good one, especially at 6950 as it is hard to get all the limiters removed on some of the codes. Anyway, if he hit the limiter hard then the engine would have slowed down rapidly, especially if he didn't push in on the clutch when it happened. All that mass on the belt system from the peripheral components could have just kept on going and spun the balancer.
