That is essentially whats happening.
I'm not sure what kind of battery acid they used to clean stuff with... But rotted through the disposal, flowed inside the flex into the box and down the wall. Eating everything in its path. This section of wall is coming out.
I was actually really surprised it had not shorted yet, and still worked! A lot of the insulation was eaten off.
(Before anyone gets worried... it's a wye system, and the ground and neutral are good.)