Short answer, lightning carries so much energy in the form of electromagnetic waves, it can create current in objects a few km's away.
Lightning can create electric fields that are more than 100kV/m directly, shown from data taken from a plane-strike.
Source: http://www.atmo.arizona.edu/students/courselinks/spring15/atmo589/lecture_notes/apr03_2015.html
These taper off with near field and far field rules. If the lightning were obeying far field rules the electric field would taper off with the distance squared. These fields can still can be quite high even only 1km ( or a few kms) away from the strike, a 1m conductor would experience capacitive coupling of a few hundred volts a few kilometers from the strike.
I expect that the stove pipe is a little longer than this.
Here is the fields from a simulated strike. Even the magnetic fields are in the A/m range. Every conductor every wire could also have current inductively coupled into it.
Source: Analysis of lightning electromagnetic field propagation in mountainous terrain and its effects on ToA‐based lightning location systemsenter link description here
At even a trace of 1cm could experience a few volts across it, which may be why your LED's are lighting up.
Apparently nearby mountains amplify electric fields as shown in this simulation (although the wave and the mountain in the simulation are not on the same scale, perhaps this is leading to even more amplification of the EM-waves):
Source: Analysis of lightning electromagnetic field propagation in mountainous terrain and its effects on ToA‐based lightning location systemsenter link description here
There is one cardinal mistake. The water pipe may not be used as ground, rather a water pipe has to be grounded. Grounding the pipe provides safety to the user if some device, for example boiler malfunctions so that you don't get electrocuted in bath.
It is forrbiden to attach other devices to the pipe to serve as ground point.
When the lightning strikes a grounded object, the current passes through and the entire grounding potential becomes V=I*R_ground. It is self explanatory that having good ground makes this voltage very small.
Best Answer
Strictly speaking, in regards to your original post, yes - grounded metallic piping will act as a Faraday cage and can shield wiring and electronics from EMP. To be useful, the whole system must be encased, which may be practical or not. Likely, a conduit could be run directly from the generator to the control panel/annunciator.
Watch out for other signal paths, though. Generators having wiring harnesses that would be impractical to encase, and may need shielded wiring.
As an aside, EMP damage has been assumed here, and may not actually be the case. I still urge that you have the board closely analyzed. Having to replace the board anyway, you might be able to get one with better isolation that isn't susceptible to the kind of failure the original board suffered.