Not sure how it came off. I def never removed it but you're right that there's no way it should have been able to get into the cylinder. It must have escaped into the crankcase through the pushrod hole. Now that I think about it, I found something last time I took off the side cover. I thought it was a plastic piece of the governor that I had missed and didn't pay it as much mind as I should have.
My current guess as to what happened is that rotating the engine backwards damaged the compression release mechanism which then helped the exhaust side lash cap get kicked off somehow. We'll see what happens when I try and drill start it tonight. I guess I'll try and empty the carb bowl first and make sure the plug is sparking properly and remove the extension tube I have on the gas tank to give it the best chance of success