Mech,
Just a other few opinions (and comments and questions):
1) I don't think you failed your buddy during the buddy check unless you failed to note the sad state of his gear. It sounds like you would never dive with gear like that on your own back, but was it bad enough for you to thumb the dive? No, based on what you said. I think the fact that you knew the guy and you knew the gear may have allowed you to go along, but sometimes "stuff happens". Granted older gear might suggest a more thorough check, but even brand new stuff can fail. Would a more careful inspection have revealed any defects? Don't know. Just food for thought.
2) Should he have been going that deep with raggedy gear? Sounds like the answer should be no, but who knew? Now you both learned a lesson (and you shred it with us!)
3) Did you have enough air in your tank to have shared air for a safe ascent if the failure had been on his regulator? If yes, then you weren't really at risk per se.
4) Once you were safely at the surface, the major concerns should be over. Now you just have to get in safely. Granted, at Monastery, that is a taller order than at the average dive site. Should you have given him your BC? Why not? Here's my thinking: If the situation had gotten bad, he could have always dropped his weight belt at any time. The fact that he never dropped his weight belt, and you never suggested that he should tells me that you had everything under control. You gave him a sort of a "flotation device" to help him out. So where's the problem? I might be concerned about you with 8lbs and no BC, but chances are you floated just fine without the big steel cylinder on your back. Again if you had gotten into trouble you could have dropped your weight belt. You said that you were positive. Great, no problem. You went in, dropped excess gear and then returned to help your buddy in. Sounds to me like everything was done just fine.
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They always say that the most important thing is to not panic. Sounds like you and Karl had that covered completely. Maybe I am missing something, so I am curious about exactly what your Instructor chewed you out about.
Question 1: When the low pressure inflator hose broke off did the air in the BC leak out, or were you just not able to add any more air? I am guessing that the broken hose allowed for air to escape.
Question 2: Would you do anything different knowing what you know now? Besides refusing to dive with such old gear? Starting from the point of failure, would you do anything different?
PS: if you had refused to dive with Karl because of his gear, would he have bought new gear, or would he have done anyway, either solo or with some other buddy. Just wondering.
Wristshot
(not that you asked) I would not hesitate to dive with you.