I had the EXACT same thing happen on my '98 KDX200 about a month and a half ago. I only had 2 weeks b4 the GNCC started so I bit the bullet and sent it to Fredette, who I have a good relationship with. Yep, he said, It's the KIPS pin. It destroyed 4 gears and 1 gear-on-a-shaft. While he was in the cases I had him replace all seals and bearings so I wouldn't have to worry about them for a while.
I had been having trouble with my KIPS system freezing up and staying locked open. As quickly as 3 weeks after a top-end rebuild they were sticking again, I had changed a few of the gearing parts in the KIPS system (claw and advancer rod) with no success. Jeff said this was definitley a contributing factor to the KIPS pin breaking off. I decided to send him the whole engine so he could check it out. It turned out that the guy who had the motor before me had NEVER done any maintenance. The machining in the cylinder where the KIPS valves go had been chewed up and worn by the gunk/carbon that had sat in there for so long so as soon as I got a little goo build-up they started to sieze open.. time for a new cylinder.. Jeff got me a slightly used cylinder he guaranteed was in good shape, he had just ported it and it had low hours so the plating was good. I had him do the entire top-end as well.. Piston, etc...
All-in-all with shipping it cost me $807 but I now have a basically brand new engine in the bike and I will be able to maintain it as I do without worrying about damage done by the previous owner. I should be able to ride this thing for years to come!
Anyway, just wanted to share my experience in hopes it may shed some light on your situation. If you invest $800 in the bike you can have a machine that will last you many many moons.
Out of curiosity, at what interval were you cleaning your KIPS system? What type of pre-mix do you use? Did you ever just order gaskets and rebuild the topend without replacing the piston, basically, just a KIPS clean-up?
I was using H1R premix and have switched to Golden Spectro. Jeff said he could always tell an engine that had been run on H1R because it would have a TON of carbon deposits and everything would be gummed up. He said he could tell immediatly that's what I was running. I have switched and have had no problems with KIPS system sticking and really no spooge to speak of. I have put probably 20 hrs. on the bike since the rebuild.
Anyway, wow what a long post. I'll go now. Hope some of this helps.