Mooredog: This is a great post and highlights what I think is a bit of a loophole in the Rules that I have been hoping to address for a long time. I think a similar issue was even discussed to some degree before the previous summit (see e.g.
http://www.pokertda.com/forum/index.php?topic=150.0): to what extent does a player still in the hand have an obligation to point out that an irregularity is going to occur without delay?
If it were not for Rule 1, I think this situation would have to be governed by the same rules in which a player throws his hand face-down into the muck before all action has been completed. By the book, I think we would have to say that the mucking player failed to protect his own hand (by ensuring that all action was complete before mucking) and the dealer also shares some blame for not noticing that action was not complete. In that case, seat 3 would win the uncalled portion of the pot under Rule 48.
The problem with the by-the-book ruling, is that it fails to take into account any degree of fault on the part of seat 3.
In general, I think the rules need to be more strict with respect to having players be responsible for not preventing irregularities from occurring without delay when there is an opportunity to do so. Players should not be rewarded for being "wilfully blind" to the fact that an irregularity is about to occur and failing to be proactive in pointing out that the error is about to be made. In particular, they should not be given an incentive to hide their cards from other players and the dealer with the hope of being the last person standing.
We've discussed similar difficult situations in which a player has allowed himself to be skipped but fails to stop the action before multiple players act after him, or before the dealer deals a flop/turn/river, or before the dealer awards a pot at showdown. We've also recently discussed situations where players have allowed the hand to proceed as what appears to be an all-in situation, and then later conveniently point out that the bettor was not actually all-in, or that a player had not yet called all bets. In my view, these situations are difficult to deal with because we don't have a rule that puts a greater burden on the "innocent" party to stop an error from being made and reaching the point where it cannot be corrected.
Personally, I have no hesitation in applying Rule 1 in situations where I think a player has had ample opportunity to make the table aware that an irregularity has occurred, but failed to draw attention to it with the hopes that he will either win the pot on a technicality, or be given a 'second chance' to win the pot if the TD decides to undo the action and allow him to act. In Mooredog's example, if seat 3 had no reasonable chance to stop seat 7's hand from being mucked, then seat 3 is the innocent party and my decision would likely be in his favor. But once he fails to bring attention to the situation "without delay", he is no longer an "innocent" party.
We've had similar discussions before:
http://www.pokertda.com/forum/index.php?topic=559.0. Right now, there is no way to deal with seat 3 purposely sitting in silence while the action continues hoping everyone else's hands gets mucked without resorting to Rule 1. I would have been inclined to rule in the same way as Stuart, deciding that seat 3 lost his right to act rather than digging hands out of the muck. I may have been inclined to make up something like: "This is like 'accepted action' - you allowed the pot to be awarded and the cards to be mucked, so you accepted that the hand was over". But I'd much prefer to have an explicit rule that clarifies that if you are involved in a hand, failure to bring notice to an irregularity without delay may result in losing your right to act or your claim to the pot.