The crew didn’t blow up(src).
The flight, and the astronauts’ lives, did not end at that point, 73 seconds after launch. After Challenger was torn apart, the pieces continued upward from their own momentum, reaching a peak altitude of 65,000 feet before arching back down into the water. The cabin hit the surface 2 minutes and 45 seconds after breakup, and all investigations indicate the crew was still alive until then.
We were led out of our classrooms to watch it since we lived in FL. When the launch went pear-shaped, nobody really understood what had happened, we just thought it was part of the fuel tanks dropping away. We went back in, sat down and continued our day. I don’t think the teachers ever told us something went wrong and I found out about it that night at home.
There were no explosive materials onboard the crew pod so no, still no explosion when hitting the water. If anything, it would be closer to an implosion.