I first heard about the debris impact week before last. According to an article in my local paper (I'm looking for a link), the insulation that fell off on launch was believed to be as large as 2x3 feet. Other estimates I've seen put the piece at perhaps 20 inches long. The Shuttle was about 80 seconds into the flight and doing about Mach 2 at the time. The article states that the relative velocity at impact was perhaps 500 MPH.

It occurs to me that while the insulation was very lightweight, it was also very cold due to it coming off from near the liquid oxygen tank. If it came off of the liquid hydrogen section of the ET, it'd be much colder. The LOX tank is in the foreward portion of the ET, so at present that seems to be where the piece originated. My guess is that the cold insulation was pretty hard, which would likely affect the dynamics of the impact with the tiles. Even a light mass that's hard can do significant damage in a 500 MPH impact.

According to NASA officials over the weekend, the piece wasn't detected until the day after launch as part of the routine launch film reviews. I gather from that they didn't know it happened in real time, so there was no known reason to abort the launch.

Of course, all of this is speculation. When I first heard of the accident, several possible scenarios immediately popped to mind. NASA is exactly right that they can't get locked into any one scenario so early in the investigation. Fixing the wrong problem won't do anything to improve safety.