The part of the story that keeps my mind going back to an air leak is the part about the backfire. From our experience there is a very close correlation between backfiring and air. This thought conflicts me however since you say that the failed piston is on the PTO side of the engine which in essence has a double seal. Most of our crank seal failures have been on the Mag side of the engine. If there is oil left in the gear box then I would rule out crank seal failure.
So the next place I would look is to the carb boot. Did you use any sealant on the carb boot and carb spacer? If so, what type? And, is it still intact?
There is a taper to the inside hole of the carb spacer. Was the spacer installed with the taper in the correct orientation?
Then the last place that I would ever suspect is where the base of the cylinder seals to the crankcase. Are these mating surfaces clean and flat? Did you use any sealer on the gaskets?