Engine Failure found. Pics of carnage.

[Sluggo]

I think you could call this a consensus. You can replace the pan gasket with the engine in the car, I did mine in the car when I went into the timing cover. Like John said, you can check a main or two and a rod while you're in there. This also gives you excellent access to clean out the particles.
The good thing about shavings like that are they don't float too well. You'll find when the pan comes off that they are concentrated near the front of the pan.

 

[Starfury]

Ouch.... I'd be interested to see if any of the valves are bent.

Also, if it's any help, I spin my 331 up to 6k all the time with a (good) double roller chain. Never had any issues.

 

[70_Fastback]

I pulled the valve covers tonight, and there are very fine, granular (almost like sugar) metal specs in the oil, that is pooled in the heads...

:expl

To me that says there is garbage all through out the engine...

 

[Sluggo]

I pulled the valve covers tonight, and there are very fine, granular (almost like sugar) metal specs in the oil, that is pooled in the heads...

:expl

To me that says there is garbage all through out the engine...

Agreed

 

[70 StangMan]

Rut-Ro :skull