That is the best evidence I have ever seen that a case will not necessarily seperate because the headspace is a couple of thousandths of an inch above some gauge value. In this case, it's several millimeters above gauge value. Why did the cartridge fire at all - because it was held back by the extractor.
This photo should be required "reading" for all those who make newbies nervous by claiming that firing a tough old service rifle like an M1917 is dangerous if the headspace is a gnat's whisker too large.