I'm wondering what is the best way to explain and make things right with our affected clients? Direct email, blog post, and/or something else? Who has done this right/wrong in the past?
TIA
Over 1000... hire a PR expert because you're gonna have some real problems either way. (edit: Actually, I don't know if that's the right response here. It's outside of my experiences so maybe someone could weigh in on what to do on a problem of that scale)
The important thing is to identify the impacted clients, assess the severity of the problem, and tell them how you're going to prevent this from happening again (I assume you've figured out how to stop this from happening again).
Good luck.
Now you have a sales call. Every point of contact with a customer, even telling them you screwed them, is an opportunity for a sale, or at the very least to come out of the situation more understanding of each other.
A previous employer of mine learned this the hard way.