Hi Dave,
Was thinking of sending you an email again but decided to join the forum instead, so here's my first post here. Please be nice to me
I just saw your vid on the repair and would like to comment on a few things
As per some comments, the uC is a Fujitsu brand. It has a different "F" than fairchild. A google image search confirmed this
The part is an MB89F538 (
http://www.alldatasheet.com/datasheet-pdf/pdf/153408/FUJITSU/MB89F538-201PV.html) 8bit uC.
Also, the part that has burned is most probably a ceramic capacitor for EMC/EMI. You have the two caps from each line to ground and then a third across the AC input.
In my previous work, for fire hazard reasons, we use two ceramic capacitors in series to prevent a direct short across the supply line causing a fire. With two in series, if one fails, the other will work fine no problem in the application.
What I think happened here could be that the cap experienced a voltage spike across the lines or that it is cracked in the first place after thermal cycling or board flexing causing an internal short which resulted to a direct short on the AC input line then causing the cap to burst into flames. (Yes, I have caused the same type of flame on a project when I subjected an axial MLCC with voltage spikes.)
Also, with regards to the MOV not being populated in the daughter board, we used to design everything into the PCB and populate everything in the initial design. After testing, we remove parts to save cost and check the performance if it still meets the requirements. If it still does, then we leave the part off in the next revisions up to the mass production stage.
-Raymond