Ewan,
That story is essentially correct, as I understand it, it was a Navy Pax River Cobra flown by an instructor and TP student, doing an envelope demonstration as part of the training syllabus in early 1983 (I was in a test program there in June of 83 and it was a fresh topic among the instructors.) The flight was not a test flight, it was not specifically to get bumping, it was to show the safe envelope limits to a budding TP.
The rotor sliced thru the cabin and killed the front seater, the back seater managed to bail out. Not Pax's finest moment, frankly.
I do think that we must teach those who fly teetering helos to recognize what they do to make this happen. If we try to tell them that "it happens" and not "you make it happen" we will create a bunch of folks who are scared that their machine will leap up and try to get them. In truth, with mast bumping the pilot gets the machine.
To prevent mast bumping, do not push over rapidly, do not dump the collective at high rate while doing so. If you "accidently" maneuver that way, recover by slowing down the forward stick, which will build the g back.
I am concerned when Robbie pilots use terms like "pull the collective as high as it'll go" and "stomping in right pedal" as somehow helpful. This shows two bad things: That the mast bumping happens to them, and that they have to intervene rapidly and forcefully to save themselves from this situation delt them. In fact, mast bumping is caused by pilot aggressive behavior, where the pilot propels his machine to a place where it is out of control.