There seems to be some confusion.
There were 2 outs. All runners were advancing. There was only ONE contact with the bat. Pitch was completely missed by the batter. Catcher dropped the pitch. Batter drops the bat and it hits the ball which is in foul territory.
Interference is the correct call for FED Softball Rule 8-2-6 in all dropped 3rd strike situations.
Intention on the part of the batter should be part of your ruling in FED Baseball. No intent, play on. If you feel the batter intentionally dropped the bat on the ball, then he is out for intentional interference 8-4-1a.
Tough call. Just hope that we are all ready when it happens.