What is going on in the PAC NW (Microsoft Outage)

The following is all hypothesis:

Reading the MS announcement that says "At 6:30 last night, a configuration change was made by a Microsoft technician to the routers on the edge of Microsoft's DNS network", and adding in the 50% packet loss you list above, it looks like the MS technician installed some sort of Cisco TCP/UDP rate-limit on some interface along the data path.