Forkliftt: I will bet you dollars to donuts that engine had been overheated. That's the cause nine times out of ten when I see that kind of damage. The aluminum piston expands with temperature more than the cast iron block, and once the piston grows, it creates additional friction, which makes it grow more, which makes more friction until it siezes.
Naturally, one cylinder will go before the others, but the rest couldn't have been far behind.
An overheat this serious is normally due to lack of coolant. If the system is full, boiling coolant usually prevents damage this serious.
With respect to the old Lehman, I'd pull the head and have a look at all the cylinders. It'll only cost you a head gasket set and a morning, those engines are pretty simple and the head can be yanked without lifting the engine off the mounts. Personally, I question the whole story about a 0.005" undersize piston being installed. Normal piston-to-wall clearance is on the order of .002 or .003, so adding .005 to what it already had would not be something a professional should do. If there were a problem with piston-to-wall clearance, then it should have been addressed correctly, not Mickey-Moused with throwing an undersize piston in.
Once you have the head off, then you can check the piston-to-wall clearance with a feeler gauge. If this "put in a .005 under piston" story is true, you'll be able to get a .004 or .005 feeler gauge in between the piston and the wall, down to the top ring. It's not a great way of gauging piston fit, but it will tell you if there's truth to this story.
That oil analysis ain't great - high aluminum, copper and iron spells trouble to me.
GOOD LUCK!
JS