At least two things had to happen at once here.
First, a large amount of current had to have been drawn from a point at least after the last damaged receptacle and conductors. This may or may not have been more than OPD was rated for.
Second, the connections to those existing receptacles HAD to have a high resistance. This is evidenced by the burned and overheated insulation only in the vicinity of the connections. (This is exactly the same problem you see with aluminum wiring which is caused by the connections becoming loose.) A normal connection should easily carry a current equal to that of the conductor and the cable would have also faulted if enough current were drawn.
As to the breaker, you say that the wire was also burned on its screw. Question is then, did the breaker fail to open due to an excessive current condition or was there a high current draw within the rating of the breaker which caused the connections to overheat, including the terminal (which was also loose) on the breaker and THAT is what did the breaker in.
Now, a couple of things that bother me about this story. Did the extension wired by the homeowner ever work or was this problem started (and was evidenced by the breaker buzzing) when he completed his work and turned the breaker back on for the first time? If the latter then that would indicate either a problem with something he did or there was something plugged into a receptacle AFTER the last damaged receptacle that drew a lot of current when the breaker was turned back on. I suspect somebody (not you) is being less than forthcoming here.
As I said above, even if the breaker was actually bad (which I doubt), there had to be a reason for the current draw first for anything to happen and we are not hearing about that.
It would be impossible for the breaker to cause this by itself. Once we know exactly what caused the current draw, a determination can be made as to how much it was and only then we can say whether the breaker failed to trip or it was a victim of overheating itself.
-Hal
