The answer to your question #1 is yes he could have fixed it by calling the runner out that ended up on second.
A better tactic on your part should have been to file a protest based on his rule interpretation. This needs to be done immediately prior to another pitch. Depending on the league, protests are allowed or not and are settled right there or are heard after the game.
On question #2 - If first base is occupied with less than 2-outs and I have an obvious dropped third strike I will say loud enough for the batter and catcher to hear "Batters Out". If it was a pitch close to the dirt, the catchers reaction usually tells you the story.
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R.Vietti
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