A guy with one of these appeared on DIYAudio a month ago actually ! Despite having never seen it before, my suspicion fell on C405 immediately. In that case, the guy had measured the primary voltage of the transformer and found it was low. I did have a WTF moment when I saw the flipflop being used, but after a minute or two I suspected they were using it to pulse feed the primary rather than running it directly from line voltage.
It looks like they should have specified an X2 rated part, but the bean counters decided to cut a few cents and made it an ordinary film cap. The problem is, this cap will see all sorts of line spikes, which will ruin it. If they had put a VDR across the mains input, it might have been OK. Bean counters again! An X2 rated dielectric would have had some self healing properties which would have allowed it to tolerate line spikes, and the unit would have been reliable in the field. It is just as well the film capacitor they chose fails open, or there could have been a fire hazard!
As someone else mentioned, C405 is functioning as a dropper due to reactance. This was quite common for small "off line" supplies before SMPS became so easy/cheap to produce. That produces the voltage that the flipflop runs on. Also they are using it to AC couple the line frequency in, and the thing overall functions a bit like a light dimmer. My guess is because the MOSFET wasn't firing often enough due to the low coupling capacitance, there was the correct voltage on the secondary but not enough current backing it. The micro probably ran OK, but as soon as it tries to switch on the relay, the voltage collapses, resetting the micro - so all seems dead.
To those who have said "nowadays this would be an SMPS", true... the standby supply likely would be. However, the main supply, it depends. Class D (PWM) amplifiers are now becoming common for receivers due to their high efficiency and low heat output, and these are perfectly happy with an SMPS supply. On the other hand, a lot of high quality audio is still done with Class AB amplification, and it takes a LOT of effort to get a clean enough output from an SMPS. So typically, if it's Class AB, it will use a good old linear power supply.