Thanks for all the replies. I know the warranty co will be sending another co out for a second opinion, and more than likely they will find a repair solution--which is fine with me, as long as it is a real fix, but I'm realistic enough to know it will probably last until the warranty period expires.
If replacement is the determined remedy, I would rather take the cash settlement and go with a company (and equipment!) of my choosing.
I was not trying to impugn the reputations of cos that do home warranty work, but 2old, nick, and git-r verbalized what my concern was: More reputable HVAC companies will not allow their standards to be compromised by a warranty co., so they don't partner with them. The red tape and reimbursement issues can result in decreased revenue, which requires a lower operating budget, and therefore quality of workforce and materials must be constrained. I'm not complaining, I realize that's the way of the world. I just want to be aware, so I can make the best decision. I would rather spend more and get it done right--It always costs less to do things right the first time.
Again, thanks for the insight, I'll keep everyone posted on the continuing saga...