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Dealer was not doing his job. Dealer screwed up big by mucking the hand of one of two people in a big pot. There was really no reason dealer should do this. Seat 1 also screwed up big in leaving his cards unprotected while in a huge pot.

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From the description of where the cards wree left there is a decent chance the dealer did nothing wrong. The muck is a large mass of cards (note if your dealer squares up the muck etc tyhey are making a mistake). It is not uncommon for a couple of cards to come free from the muck if the dealer bumps it dealing cards or whatever. When a dealer see somes cards lying there next to the muck his job is to bury them in the muck, not look around to see where they came from etc. The players that think he should look for where the cards came from are likley the same ones that will complain if the dealer doesn't deal fast enough. If you want the games to move you have to accept that dealers learn to do the same things over and over. one of the things they learn is to get cards in the muck if they are laying in the open on the table.

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If seat 1 left his cards next to the muck, he is an idiot, and the problem is completely his fault. If the cards were close in front of seat 1 and the dealer swept them away when it was obvious seat 1 was involved in a major 2-way pot, then the dealer made a major error, although seat 1 is still responisible for protecting his cards.

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This is corect. I thought I read somewhere in this thread that the player put his cards to his right. He very well could have put them next to the muck.