The code is based on the idea that you need several things to go wrong before you present a hazard. In this case there was really only one mistake, either not maintaining the 1.25" setback or using a 2" screw. Take your pick.
The picture I saw showed this in the corner of the framing and it was hard to figure out how far it was from the surface of the closest framing.
John, I see no reason why the AFCI would have tripped until the victim had taken 30ma of fault current.
