Darn... New Engine Busted...

I concur... a new engine can withstand WOT in short bursts but this is the time when most the heat is also generated so it's possible to overheat a new engine in just a minute or less if staying at full throttle... one of the warning signs of overheating is a slight power loss, and as soon as you notice this it's time to shut it off and let it cool for at least 30 minutes before trying to ride it again. I usually run a new engine pretty hard with short full throttle bursts to help seat the rings but limit the ride or engine on time to only 5 minutes for the first several runs.
It also could very well be a piston pin clip came undone and locked it up as this has happened a few times before, luckily not to me but it has happened to others. I always recommend to never re use the pin clips because of this. A new clip can usually be compressed enough to install into the grooves, but each time this is done it slightly weakens the clip, the other part is that sometimes the grooves the clip sits in aren't cut deep enough or the clip wasn't fully locked in during installation at the factory, which is another thing to check for when getting a new engine.
As far as saving your bottom end, it should be salvageable if you can get the cylinder off the piston. If it's locked on there too good you may need a die grinder and a cutting wheel to cut the cylinder off the piston but stuff rags or paper towels into the case to prevent any shavings or grinding wheel debris from going down into the case, this stuff will wear out a new bearing in record time.
You could use a hacksaw to split the jug if it's locked on the piston really good, but still need to be sure nothing goes down into the case.
Sometimes you can pry a seized jug off a piston but gotta be careful not to bend the rod or Mar up the mating surface on the bottom end where the cylinder mates up. Or if you got access to a press and a way to hold the cylinder that's another way to get a stuck cylinder off without harming the bottom end.
If you're lucky tho the jug will come off with minimal force just by working it back and forth to un jam it.

Ouch. This is why I'm an advocate of a teardown before installation. That way you get all the china dirt and metal shavings out of the engine before running it. Yes, I have found significant bits in my engines during a pre-installation inspection.

You can check out Thatsdax.com, he sells engines by themself on the second page of his parts pages for like $129 + 19 to ship.
All of the engines I build are using the bottom ends he sells, but it's the top end you're going to need... The best quality cylinders I've seen for sale right now are from mzmiami on ebay, they have nice big ports and the fins are cast nice and thick, mzmiami also sells top end kits that basically include the piston, rings, cylinder, and intake. This guy also sells the knock off versions of the Fred, Jake's diamond, and Bicycle Motor Works heads, but you can get a genuine Fred head straight from Fred at crmachine.com for less than the knock off price, and there is a quality difference, I bought a knock off BMW head and it's no where near as nicely done as the genuine article, it looks and works the same, but these are made from cheaper metal and the machine work is a bit sloppy so it's best to just get the genuine heads if building something that's gonna be really nice. Fred sels his 6cc heads for $39 on his site and that's the best deal going.
Here's the ebay link for mzmiami's cylinder kit, this is the 40mm bolt spacing but it includes the intake so it'll work on your bottom end, he usually has the 32mm ones, but has the 32mm bolt spacing cylinders for $18 each, just be sure to get the right piston for your bottom end, you can easily tell by where the pin is in relation to the bottom of the skirt... http://www.ebay.com/itm/MOTORIZED-B...ON-KIT-AND-40-Mm-INTAKE-MODEL-B-/281772004785 I've bought a bunch of these cylinders and they are definitely tops with their huge ports and thick castings.

Hopefully you got the one with the same piston type as what you got now, but I'm sure it can be swapped out if not, the only difference in the kits are the piston...
As far as cleaning out your bottom end, after you borescope it, you could use brake cleaner to de grease it and flush it out, then either blow dry with compressed air or let the stuff evaporate out, once this is done it'll be bone dry and free of grease or oil inside the case and any small particles of anything can be shaken or blown out, just be sure to re lube the bearings before running it again as a dry start may not be good for things, just a dash of oil or 2 cycle mix in the case, swished around to get some oil back into all the bearings will do the trick.

While taking the case apart can be a daunting task, it's really the only way I would feel comfortable running the engine after catastrophic failure. The clutch tool is a press for every gear on the engine. A few bolts removed, a few gears pressed off, and some persuasion will get the case apart.

The best part about getting the case apart is that you can match the transfer ports between the cylinder and case. Big power potential there. Not speed, but an increase in power across the band.

I definitely agree there... tho it is possible to get everything out of the case without splitting it, there's always the chance something could get missed or there was an extra clip, washer, metal shaving or who knows in there at the time it was assembled that destroyed the top end so even if you can account for all the parts that belong in there, it is possible something else was in there that didn't belong all along...

but that's also the beauty of going thru an engine before installing... to split the case isn't that hard or time consuming but be sure to have a new case gasket, new crank seals, and I would swap out the bearings while in there... usually when you take these that far apart you'll find a lot more stuff that needs replaced... my very first engine had an issue that required the cases to be split and I found the clutch bearings were shot, the crank bearings were rough and already had side play, and the crank was badly untrue and I found it to be cheaper just to replace the bottom end with a new Dax unit as quality bearings costing about $12 each And by the time I priced the gaskets and seals it was so close to the same price I decided on the Dax bottom end... it would have costed me about $10 or $15 less to replace the bad bearings,the gasket,and install new crank seals as cheap insurance, not to mention a Lot of lathe time for the crank and his bottom ends already have good bearings and balanced cranks so I went with the new bottom end and used the old one for spare parts...
Bottom ends are fixable and if the bearings are ok, then it would be more practical to just buy a new gasket and set of crank seals, but if you find you got bad bearings then it's decision time....

To reassemble the bottom end is pretty straight forward but you would want to make a small wooden spacer to keep your flywheels from losing their geometry, these will move on you if installing the case halves and you have to push down on it too hard to get the crank into the bearings, but the key is to be gentle with it while installing the case over the crank, the spacer is the life saver tho and will prevent knocking the crank out of true if it does need a little love tap going back together... Fred has a few good videos on assembling the bottom end and he addresses this issue very clearly.