Since both of us, the umpires had never really seen a play like that, we got together and used our best judgment and knowledge to make the call.
Since the rulebook says that if any pitched ball strikes the batter, it is a dead ball, regardless if it hits the ground first, that is what we used to make the ruling. The batter swinging at it makes no difference.
(If a better, say, squares to bunt and he offers at the pitch and in doing so, the pitch hits him, a strike is called as he did offer at the ball, and being hit has no relevance except making the ball dead)
Since it is now a dead ball, the runner had to return to 1st base, as that was his position at the time of the pitch.