That engine should have been torn down at least 10 to 20 hours ago and the piston replaced  You are lucky the skirts did not break off and destroy your cases and cylinder.

The piston had too much time on it for the way the  piston has been modified.   When the engines are highly modified and the pistons are modified, piston life is always shortened.  The power output, the air filter efficiency, premix oil ratio and how hard the engines are ridden determines the piston life. 

The following table is a typical ring and piston change schedule recommended by Yamaha, Kawasaki, Honda , Suzuki etc for the stock two stroke motocross bikes.  Keeping fresh pistons and rings is essential for the engines to perform very near their optimum level and prevent piston failures due to fatigue.

125cc single ring pistons: Install new ring every 2 to 3  hours and a new piston every 4 to 6 hours.  These stock engine make 28 to 35 HP.

250cc dual ring pistons:  Install new rings every 4 to 6  hours and a new piston every 8 to 12 hours.  These stock engine make 41 to 46 HP

500cc dual ring pistons::  Install new rings every  to 4 to 6  hours and a new piston every 8 to 12 hours.  These stock engine make 45 to 55 HP.

Following the above rebuild schedule will  keep the engines producing power within about 98% to 99% of what they produce when the piston and rings are new. 

Some guys think this is short piston life but is really in line with most High Performance two stroke engines.  Some of the highly modified 125 and 250 shifter Kart engines get new pistons every 1 to 2 hours.

Most guys with Lt 500S do not care if the engines are loosing a few percent off of it's peak power potential but all of the large displacement single cylinder two stroke Wiseco and Wossner pistons collapse because the skirts are too thin.  The big bore forged pistons will usually collapse .003" to .005" in 4 to 10 hours of hard running.  Thin skirts flex and crack.  The modified big bore engines will usually loose 2 to 4 HP if their rings are not replaced every 4 to 10 hours.

  The LT 500s that have good pipes and porting should be torn down at around 10 to 20 hours the first time after the engines are modified to inspect the piston.  If the piston does not have any cracks and the clearances are still ok put some new rings in it and run it another  10 hours or so.  Riding styles affect piston life.  Some guys get more time out of a piston than others.