"I was under the understanding that once a player tosses their cards to the dealer face down and the cards "touch" the muck pile they are "dead"."

This should not be treated as an absolute. Since there are no universal poker rules to cite I will cite Bob Ciaffone's Robert's Rules of Poker which provides.

"Cards thrown into the muck may be ruled dead."

the important thing here is that they "MAY" BE ruled dead not must be ruled dead.

Virtually every cardroom I have been in has a rule that reads along the lines of

"Management reserves the right to make decisions in the spirit of fairness, even if a strict interpretation of the rules may indicate a different ruling."

Here is the thing about the situation when the player tossed his cards into the muck facedown he was the only player in the hand who had any claim to the side pot. The all-in player had no claim to the side pot. The player who mucked his hand should be awarded the side pot. Since he has mucked his hand facedown I see no reason to let him contest for the main pot (though there are circumstances when identifiable cards in the muck could be retrieved, there doesn't apper to be any reason to do so here).

So I would award the side pot to the player who mucked and the main pot to the all-in player. I can not see any circumstance where you would ever award a pot to a player who never contributed to it.