Why did this device go bang?
The bottom of C2 is not ground. It is connected to the live input by the diodes in the bridge rectifier on every AC cycle.
During the negative half-cycle of the incoming AC waveform, the Neutral wire is positive relative to the live wire.
The two grey diodes in the diagram below will be conducting for this half cycle, the other two conduct during the other half cycle.
The Neutral is connected to the protective ground at the circuit breaker panel (depending upon the local electrical codes). So AC power earth and the neutral line are effectively the same point electrically.
The neutral wire (or earth) where the short circuit occurred will have a voltage (up to ~300V) relative to the bottom pin of the capacitor.
The screw caused a short circuit between these two points and caused a large current to flow along the path of the red arrows causing the upper-left blue diode to be destroyed.
During the other half cycle of the input waveform, the voltage between the two shorted points will only be ~0.7V across the already conducting lower-left grey diode. No damage will result as a result of the short-circuit.

You should always be very careful when testing or inspecting a device such as this - there is no point that is ground.
If for example, you connect a grounded instrument such as a scope you can cause a similar destructive short circuit.
It is common for the power supplies to be organized similarly, computers, TVs, DVD players etc.