Bummer! I've seen that happen on only other bike in my life. That one was definitely user error, as the head tube buckled far away from the lug.

It was not unusual BITD for production mfrs to save a penny or two by using a cheaper HT. Every Lejeune I have ever seen uses a seamed head tube, for example. Usually not a problem because HTs are pretty thick-walled anyway.

I say that if the fork turns without binding, and it doesn't pull when riding, go ahead and ride it. The stresses on the upper lug are much lower than the lower lug. Replacing a head tube isn't an easy job as I'm sure you're aware. But easier than a top tube IME.