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damn OP, i've been in a small scale situation like this before with my old car... the dealer tried saying I needed to replace the entire motor as well when all I did was warp a head gasket!!! fucking robbery! so you know what I did? I found an inside man to tell them the radiator was leaking and what do ya know... The dealer all of a sudden said it could be fixed without a replacement motor when it was on their dime now... so OP do what you can to make this situation better... because in all honesty no one out there is a saint and everyone is out there for themselves... if you've never made an immoral decision in your life, then go ahead and bash everyone saying to do the immoral... but I highly doubt that's the case here...
edit: I do however firmly believe in Karma and try to keep mine in the green... but the dealer tried to fuck me over, so I returned the favor.
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