As we discovered in the theater, water fog can do a number on radio communications in certain bands, even in very small amounts. So it doesn't surprise me that the video might have dropped out while the telemetry (ostensibly on a more robust frequency, and with data integrity checks in place) soldiered on.
The engine anomaly looks like it starts at around T+18, although the sudden deflagration doesn't occur until a few seconds later. It looks to me like a fitting might have opened up. The bright spots around the solid piping indicates the flame is hitting with considerable velocity, which then indicates a leak in high-pressure flow. Unclear whether that relates to the ultimate explosion. As Musk says, they won't know until they pick through the "bits." Even well into the 21st century, sifting through wreckage is still part of the job.