Mek-a-nik,
Never seen one these engines in person but it sounds like very terrible design.
I would lean toward the governor failure theory. If the crank gear key sheared completely and cam stopped turning then engine would have stopped due lack of fuel since the valves would have worked. Plastic parts just don't have a place in engines in my opinion; although Briggs has use nylon oil slinger/governor gears for years but those don't have much of a load on them to start with.