That's not good. Whilst the dust seals melting is no safety issue, the cracked piston is a HUGE worry. If there is a single case of this occurring in a non-tracked car, I can feel a recall coming on! You just don't mess with brakes!
Current: 135i Auto, Le Mans Blue - w/ Bridgestone RE-11 rears, GP Thunder 7500k angels, & "golf tee" mod plus a few M3 suspension bits and pieces...