Unfortunately, you'll find it's a pretty rare engine in the mondeo, so problems will be even more rare. Happily the dealership is taking car of matters though.

You hadn't driven through any floodwater recently ? That could have caused a hydrolock.

Even with a hydraulic lock situation - The piston would still exist - usually conrod deforms and/or small end attachment within the piston is damaged/ cracked. A friend had an old Citroen that suffered a hydraulic incident in the floods a few years ago. Car wouldn't start afterwards due to lack of compression - the problem was the top of the pistons were now lower in the bores! Con rods were badly damaged and deformed - end of a Citroen!

I have seen this before - but way back when on a Cotina mkII. This was caused by overheating of a cylinder bore and eventual melting of a piston. In this case the root cause was a cooling system failure/big hole in radiator - temperature gauge didn't show a problem as the coolant level dropped so quickly the sensor was soon above the water line. I did rebuild this engine but it took me hours to remove the remnants of the old piston from everywhere (including being welded to the cylinder head!) - Suprisingly bore was OK

This can also be just a localised cooling issue because of a blockage or air lock (common on early Fiat Puto's after the coolant is changed as part of a service - it is difficult to properly bleed the cooling system so you can get supposed "head gasket failure" or worse just after!)

Firstly, sorry to hear about the problem but the dealer seems to be (quite rightly) taking it on the chin: as the fault happened only 2 months into your ownership then it's assumed to have been present or developing at the time or purchase.

In terms of a cause, it sounds to me like a one-off, unlucky failure - either a material fault, as you mentioned, or a related fault. With modern engine management and anti-knock sensors etc, it's extremely unlikely to have been a fuelling or ignition-related problem. We are so used to engines being ultra-reliable, it's easy to forget that catastrophic component failures like this can happen. Such failures are rare, but still possible.

One thing that can happen in high-output turbocharged engines (especially when they are tuned with higher boost, etc) is the piston ring gap can close up because of high combustion pressures and temperatures. If this happens, it puts big stresses on the piston and can crack it above the ring groove, or even cause chunks of the crown to break off. If the latter happens then the engine's internals will become shrapnel pretty quickly. Perhaps #2 cylinder had a piston ring with an end-gap that was too small, or carbon build-up jammed the ring.