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After further inspection of the chain, I think I've figured out what caused the link to wear out the way it did!
I'm also pretty sure that it was the reason I was getting tapping noise in the valve cover area. Another reason why it's important to change the timing chains on high mileage SHO's!
The video is sort of out of focus.. sorry I was trying to balance my phone on a coffee cup while demonstrating what was going on. Basically, the press fit metal pins that hold the links together have stretched, allowing an increase in the lateral movement of the chain. The end links having more room to move, then brush up against the side of what I suspect is the chain guide creating noise and causing wear on the side of the chain.
in the picture above, both pins were stretched, causing the excessive wear of the one link. and in the link above the very worn link, only the 1 pin was stretched, which is why only one side of the link had wear.