I saw this happen and wondered if it was handled correctly. Please let me know your thoughts and where in the rulebook is this covered.
Team A has 7 team fouls and team A-1 if fouled before a shot is taken. The foul is reported to the scorer's table and the ref indicates the foul shot situation to be a 1 and 1.(bonus) The Lead official before bouncing the ball to A-1 on the line tells players on the lane that it is to be a two shot foul situation. A-1 shoots and misses, ball lands on the floor and no one reacts, then coach yells "rebound", and player A-2, retrieves the ball and puts it into his basket. On one else has moved from the line. What should be done ( if anything) to correct the mistake of the ref telling both teams it was to be a 2 shot foul? The officials discussed this for about 3 mins and then decided to count the basket and give the ball to Team B out of bounds. Needless to say, Team B coach was not happy.
What rule covers this?

Well first of all, just because Team A has 7 team fouls doesn't automatically mean they're shooting 1-and-1. Did you mean Team B has 7 team fouls?

I believe this is covered by 8.6.1. If the free throw attempt is rebounded "with all other players motionless", the "play should be whistled dead immediately and resumed using the alternating possession procedure".

That does not answer the question imo.

What really should have happened is the guy handling the FTs should have said "one & one" instead of "two". But he didn't, and no one obviously blew the thing dead afterwards.

I believe they got it right, A gets 2 points for waking up first, B gets to run the endline.

8.6.1 addresses what should have happened after the first shot, when the administering official provided erroneous information, does it not?

As to what the officials coulda/shoulda done about it after they allowed A to score, sure, either they let it stand or one of the officials points out that s/he blew his whistle before the shot.

But he did not follow this advice, did he?

He should have gotten it right at first but he didn't. He could have fixed it per the case book, but he didn't. Telling the OP a remedy exists that was not followed does not answer the question. And I can't imagine coach B would be relieved knowing he got screwed twice on the way to his opponent getting 2 points.

"What should be done ( if anything) to correct the mistake of the ref telling both teams it was to be a 2 shot foul?"

Perhaps both answers are informative.

OK, we agree. Kill the FT as soon as you realize a mistake has been made. If you don't any action which follows stands.