Totally Dissapointed!!!!!

If they are charging you to support a product of their shop they are crooked bastards! They KNOW they sold you a POS and are just taking your money as long as you are willing to hand it to them! You should feel insulted, as I believe it is their intention to insult you with your own money. I would contact your local Better Business Bureau. Are they an AERA member? ( www.aera.org ) If you give them any more money, you are weakening your own case in court (in fact giving them ANY can be twisted to mean that you acknowledge voiding the warranty). Sorry if I seem harsh here, but I really dislike crooks!

Was there a stated warranty on the engine? If they are claiming improper break in, they have no intentions of honoring any warranty anyhow. If they cant tell you exactly what rings are in the engine, much less the end gap (which does matter A LOT on the KB pistons, as the top ring sits quite high and MUST have a larger gap), that leads me to believe that they don't know and don't care (or worse, know that they screwed up). The technician who assembled the engine should have taken notes on all clearances, and should have given you that with the invoice, or at least upon request.

As suggested by others, find another shop, preferably one who has never heard of the place that assembled the engine. Do a compression/leakdown test. That will tell you real quick if there is a major problem with the shortblock. Go from there.