Ohh, that sucks! Bummer for you. It seems to me that with the oil leaking out of the bad filter the pressure may have become too low to adequately lubricate the rod bearings, allowing one of them to quickly wear/stretch out of shape and allowing too much movement in the piston top, which then may have smacked something like a spark plug. They're going to have to tear the motor down to be sure what happened to that cylinder though. Nominal compression should be something like 120 or so (IIRC). Note this is just my guess, but it seems to make sense from the facts you posted.
Good luck with them, and I hope you got their word to repair/replace the motor in writing...
Scott
