I've already taken the shock back to the shop so won't be able to post any more pictures, but I can confirm that there were no cracks anywhere.
What was left of the threads on the upper section and reservoir didn't show any evidence of cross threading but every thread was stripped off from the top right down to the last. I could almost slide the reservoir back onto the upper without turning it so it definitely blew straight off.
I talked to the mechanic and he said he used some special machine to set the piston height to 10mm and that he torqued the reservoir to spec and used locktite. This was the first 990 shock that he had worked on however but he insisted that he was on the phone with KTM during the rebuild process to confirm he followed all the right steps.
He is fixing it free of charge - including a new upper, new reservoir and seals and using the old lower. After looking at the prices for the upper vs the entire shock I'm kind of wishing he'd have just got a whole new shock since I'm going to constantly be worrying that his new rebuild will fail the same way this one did.