We can't know for sure what happened. We can only give you our best guess. Mine is that the boat was overpowered by the wind and too much sail area while trying to beat to windward, and she was laboring. Here's your description of what happened: "...the boat heeled over further than I think she ever has. Close to a knock down with rail buried DEEP in the water. The boat appeared to stall or slow considerably and the rudder felt like it locked up. I could not steer much at all." In my opinion, excessive heeling caused an increase in drag, and that, along with the wave chop, gradually reduced her speed. As she gradually lost speed, she gradually lost lift over the surfaces of the keel and rudder, and at some point, her aerodynamic and hydrodynamic surfaces (the keel, rudder and sails) stalled. As she lost speed, you had to turn the wheel or tiller even more to keep her head to windward, and the effect of applying hard rudder was like applying the brakes, slowing her even more.
You said, " I've had more sail up in heavier winds with less drastic effects." On those other occasions, you might not have encountered as much chop, or you might have had the sails trimmed a little better, or your underwater surfaces might have been a little cleaner and smoother. A slight difference in the conditions can result in a very different result. I think it would not have happened if you had tucked in a single reef and rolled up a little more jib.
Of course, it could have been a lobster pot, but from your description, I don't think so.
Last edited by Sailormon6; 11-05-2011 at 10:03 AM.