This situation came up tonight at our home game, and I'm curious how you'd handle it if you were running the game. (and how you'd handle it if you were involved in the hand)
4-8 holdem with a kill. the hand in question is a kill pot. 2 limpers, 1 raise (to 16), I reraise (to 24), the $8 blind (kill blind) folds, and one limper folds, other 2 players call.
Pot is $88. 3 players.
Dealer burns, and begins to deal the flop off 1 card at a time. The first card off is a Joker. (new deck just put in, and obviously jokers should have been removed). The dealer of this hand also happens to be running the game (and taking a rake). He also was the limper (of $

who folded to two raises.
If it's your game, what do you do?
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One of the live players says it should be a dead hand, one player (that folded preflop) says you should just keep dealing. I say nothing, as I'm in the hand and don't think it's appropriate to comment.
Dealer says it's a dead hand and everyone is entitled to their money back. The 3 live players get $24, and the 2 that folded get $8.
If you were involved in the hand, what would be your reaction?
Thanks in advance for all opinions.