Bonenailer,
Obviously someone like Two fingers is more qualified than I (an M4 yet to match) am to comment on your situation but I have a few thoughts for you.
I think you must explain what happened and it would be the kiss of death not to. Be matter of fact, take responsibility where appropriate, and move on. Avoid making that the focal point of your application or interview except to give appropriate explanations and focus on the silver lining. I personally spent some time pursuing another professional, medically-related degree between college and med school and ultimately came to see I wouldn't be happy doing anything but med school. I got asked about it at nearly every interview and had decided I was going to treat it for what it was--a detour in my education, but an incredible learning and goal clarifying experience--and hopefully that was the way to go (I'll tell you next Thurs). At one interview I was in front of a panel and asked a very astute and tough question to the effect of 'if you left one professional program, what reassurances can you give me that you won't change your mind during your PGYII year and do something else (I assume he was alluding to another specialty like radiology, anesthesiology, or some other 'lifestyle' specialty). Obviously our two sets of circumstances differ, but you should be prepared for the same question, or any of its spawns, in the form of 'well, those kinds of things happen in life and are you going to just stop your residency training midstream for another similar problem (the implication being that they'll be left a resident short and the other residents will have to pick up the slack , etc, etc). (I'm merely playing the devil's advocate by asking that question). But, hopefully you get the picture. I think it's important that they are just as much looking for reasons why to rank you lower as to rank you higher (ie differentiate the applicants).
Best of luck and hopefully you have really since kicked butt on your grades, boards, research, LOR cultivation, etc. I also agree with Dr Dre that you may be someone who particularly would benefit from some away rotations assuming you feel you can do well in that setting. Best of luck.
OF