Do you think I got screwed, or is it just part of the hobby?

...The first thing he says is "We didn't find anything terribly wrong, but your bearings don't look too good". ...

He's got an odd definition of terribly wrong. I still don't think they really know what went wrong. Even if they fix it (new bearings, rings, hone, crank regrind, block cleaning, oil pump, etc.) I'd strip it down and check it myself afterwards. If they won't cover the costs I sure has heck wouldn't pay them to fix it.