It sounds like the inside of the stay was rusted almost all the way through. The shipping damage, or re-alignment efforts caused the remaining steel + chrome layer to crack leading to the initial photo by the OP. The OP then dug out and formed the hole at the end with an x-acto blade top.

It doesn't sound the the seller really did anything wrong, other than poorly packing the frame. If you look at where the vent holes are located, there appears to be a good 1.5" below them for water to sit. Every time it was ridden in the rain, or washed, you could have a large slug of water that might take weeks to evaporate. Even worse, plating acids and salts if not washed out really well will cause rapid corrosion, often to the point of tube failure. That large cavity under the vent hole may have lead to poor inital cleanup, and a good dose of hygroscopic salts sitting there waiting to go to town.