Toyota Repair: water in oil, click and clack, 2 quarts

Question
My sister had been driving her 07 corolla only a few hundred yards at a time in winter NY for several weeks when it began running poorly.  Her mechanic told her there were 2 quarts of water in the oil, no antifreeze.  How could she have driven it to him without throwing a rod?  On a separate note, just out of curiosity, some woman on Click and Clack claims she drained her transmission on a Toyota instead of the oil, put 3 quarts in and it started smoking presumably because the oil expanded and blew over the manifold.  I don't know if it was automatic or standard--suppose it could happen with standard which has a drain plug typically, just wondered if any of the automatics have a plug.

Answer
Yes the automatic transmissions have a drain plug on the metal oil pan, they are filled back up through the dipstick. I have no idea what happened all I have to go by is what the mechanic stated about water in the oil which usually means a blown headgasket.