On July 3, 1996, about 2015 eastern daylight time, a Hiller OH-23C, N301CH, registered to an individual, lost a main rotor blade and crashed while landing at the Marathon Airport, Marathon, Florida, while on a 14 CFR Part 91 maintenance test flight. Visual meteorological conditions prevailed at the time and no flight was filed. The helicopter received substantial damage and the airline transport-rated pilot and one passenger received minor injuries. The flight originated from the Marathon Airport shortly before the accident. The pilot stated the helicopter had been purchased and trucked from Texas on June 20, 1996, with the main rotor blades removed. A mechanic had reinstalled the main rotor blades on arrival in Marathon, Florida. He began flying the helicopter and experienced a problem with vertical vibration of the main rotor blades over the previous week before the accident. Several mechanics had worked on the main rotor blades and made adjustments to correct the vertical vibration problem. At the time of the accident he was flying with a mechanic who had a balancing device to obtain the inflight balance condition of the main rotor blades. After takeoff, with the mechanic on their third test flight, he remained in the airport traffic pattern for runway 25. While on the downwind leg, the vertical vibration, which had previously gone away, returned. Shortly after it returned he heard a loud "pop" noise. He immediately turned toward the airport. As he was landing a main rotor blade separated and the helicopter crashed to the ground. Postcrash examination of the main rotor blades was performed by FAA and Hiller Aircraft Corporation Engineers. The blue main rotor blade had failed and torn out of the grip plate in a spanwise direction. There was no evidence of dry rot in the wood at the blade grip end. There had been repairs made in the wood of the blade grip end of the blade and there was no evidence of adhesive in the repaired area. A material that was not specified for use on the blade was used to seal the repaired area. There was oil contamination in the wood of the blade grip end of the blade. (See attached Hiller Aircraft Report.) Available aircraft logbook records showed the blades were removed from the aircraft and inspected on August 29, 1989, 503 flight hours before the accident. The aircraft received an annual inspection on June 1, 1996, 18 flight hours before the accident.