First off, apologies for not replying the first time, it slipped through my nodification list. I'm a software engineer, so I really can't help you that well with in-depth hardware issues. That being said; I believe the sensors that we used are speced for 0 to 400 degrees, probably because it's a off the shelf part that we buy. You are correct in the observation that we limit the temperature to 260 in our firmware, due to the teflon parts not being able to withstand temps of above 260.
The PID regulator should try to keep the temperature at 260 if you tell it to do so, but it will fluctuate a bit around that temperature, it's quite possible that it will be a bit above that for some time when the temperature is still settling in.
If you sensor failed, I can offer no further advice then to contact support or use the info on Github.