I saw something similar with kittens once. I worked in a pet store that sold puppies and kittens (bleh). They sent me to see a woman who bred Persians who wanted to supply us with kittens. Her home was the worst kind of animal hoarding situation. 70 cats all locked up in one room. No litter boxes, food just dumped by the bag on the floor once a day, nasty.
I reported back to my boss that I wouldn't take kittens from her if she paid me, but my boss thought the price was just too good, ethics be ******! So the next day, there were 2 Sickly looking persian kittens in the store. I ended up having to talk my boss into taking them into a vet, because they were *very* sickly. Skin and bones, hair falling out, barely moving sickly (my boss was a bit of an idiot). Turns out niether had a eureathral opening. They had anuses, and some of the urine was somehow able to leak out that way, but not enough to keep it from causing serious damage.
When the breeder was asked about it, she wasn't at all surprised. She said she's had all kinds of "weird" kittens born there, including an entire litter born without FACES.
These kinds of defects are frequently (not always) the result of improper inbreeding practices. Inbreeding in and of itself is a valuable tool, but it must be done properly. If done correctly, it can bring out the very best genes in an animal, if done carelessly, it will bring out the very worst. Doesn't mean the two animals that produced the malformed offspring are neccesarily brother/sister mother/son etc, but one or both parent animals may be the result of poor breeding practices by others (including, but deffinately not limited to potential inbreeding).
Point being, most likely the cause is genetic, in one or both parent animals. They really shouldn't ever be bred again, together or seperate, and their surviving offspring should never be bred either. Even animals who do not show any signs of genetic defects themselves still may be carrying the genes that allow for them, (especially if close relatives are aflicted) and will pass those genes on to their offspring.
If it were just one pup in the litter with an issue, it could possibly be a fluke. A random genetic mutation, injury to the embryo, etc. But with so many of the litter being affected in such a bizarre variety of ways...(extra vertabrae?) that's a pretty clear indicator of a genetic issue...either that or massive radiation.