I say it is just a regular birth defect that can happen due to numerous factors including cooling during shipping, and just plain accidental misgrowth. Looks like the head grew into where the yolk sac would have normally just sucked into the body. There is a researcher at Oregon State University in the Poultry Science department that has huge archives of chick embryo deformities, however, to be able to use defects as part of the work, the parent strains are all marked and coded so that offspring can be tested and so on when they show up with a deformity. Some types of deformities, like neural closure defects are very common, while the one in the pic just looks like a freak "accident" as the chick is formed but just grown into the wrong parts.
Babbs, I would let the eggs go for a bit longer and then just take them out. I take it they are under a broody? Sometimes it is very easy to lose track of when the eggs got under her and how they are treated by other hens if her spot gets taken. One reason to candle before hatch is to make sure you aren't trying to hatch double yolkers as those usually end up in failure. If the hen gets up alot during incubation, it is very possible that it slowed development down by a few days.
Usually I try not to intervene if a hen is sitting and just let her do her thing as I wasn't able to micromanage the incubation process like I would be able to in an incubator.
