The photo is a little too close so I'm not quite certain what I'm looking at. My boat has a 350 MAG MPI as well but I've not had the flame arrestor off so I'm unfamiliar with the set up.
Regardless, if the muffler did come loose and was ingested by the engine it would have been drawn into one of the intake manifold runners. Given it's size I think it unlikely that it could have gotten past the intake valve (which, on this engine, opens less than 1/2 inch). It is very possible, though, that the muffler is caught between the intake valve and the valve seat, preventing the intake valve from closing, thereby resulting in a mis-fire in that cylinder. If you notice the engine running badly, or hear a miss, you'll know where the muffler ended up. This is bad because it could burn a valve.
If you are convinced the muffler is in the engine you'd better take steps to find it. Remove the throttle body from the intake manifold and use a borescope to look in each intale manifold runner.