i think you've found the culprit too. you don't want the spring to touch the tubing at all, and since the heat was primarily centered around the button area it's a good guess that this was the issue. as far as the battery is concerned, if you've been using it since and noticed that performance/ life has decreased, they may have discharged below a safe threshold, and possibly too low to hold the charge as it should normally. this is the biggest concern with imr batteries; the chemistry is much safer than conventional li-ions (LiCo), but they lack a protection circuit to prevent over-discharge. this is rarely if ever the case with regular vaping/use, but in the event of a short this can certainly happen. i would use another battery, and seriously consider throwing that one out. better safe than sorry, but if you have a meter you can monitor the voltage before and after charges and see how they fare as well as how long the battery keeps the charged voltage without use. you can inspect it visually for swelling or changes in the shrink wrap, but if unsure then the safest bet is to discard it.
as a recommendation though, for the 18650 cell, you can get the same performance for a longer period of time with the LiCo protected AW 18650. the reason we use the LiMN batteries is that most cells, pretty much everything smaller than the AW17670, don't have the drain capacity to sustain the amp draw from the atomizer, particularly low resistance atomizers. we get voltage sag, the runtimes decrease, and undue strain placed on the cell poses potential risk and shortens the lifespan. in most protected 18650 configurations though, and certainly with the AW18650, the drain rate is sufficient for any atomizer we throw at it. couple that with the over-discharge protection, and the increased runtime, and you have a battery that will you can vape with longer at the same level of performance, and a cell that would most likely survive a similar incident in the future.