anyone have an idea how this might happen?
the only thing I can think of is a piece of sand or rock made it's way through the carb and into the bottom of the case..
is that possible.
the whole is directly in line with the swing of the crank arm
the engine was mounted sideways on a profile.

Think OS will warrenty this one?

What's the inside look like?
If it's torn-up all the way around the bottom, it's likely the rear bearing went south - there's not much clearance and you should be able to feel the slop in the shaft.
If there's no damage other than the hole, it was probably a void in the casting.
Either way, it should be covered.
Kirk

Is it a .32 SX? It has a 2 year warranty. You could always plug the hole. Then you will not miss your engine for a few weeks.

Bugsy,

Judging by your member name; I'd say a competitor planted an explosvie device in your plane and you're lucky your weren't there when it went off!