Well my mechanic called this afternoon and ask me to come by after work.
I stopped by and he had the head off the rear cylinder and the cylinder removed from the engine.

I didn't take my camera so no pictures but the nut ended up right between the valves and scared the edge of the head near where the gasket seats pretty good it also pinged a pretty good impression in the top of the piston also.

The piston and the head will go out to the machine shop tomorrow for evaluation of repair. My mechanic doesn't think that the piston is cracked but will have it cleaned and check just the same.

He also thinks that the damage on the head can be repaired.

We expect to hear from the machine shop by monday.
Fireman, when we re-install the K+N we are going to use nyloc nuts this time and put them on the outside of the filter.

Is this how you did yours ? what did you use for a spacer on the rear bracket ?