Since we are voicing opinions, I will tell you mine.
From the original post, John had been in contact with Keith before the engine ever started. If Keith thought the problem was serious enough that it would jeopardize the warranty, then he should have told John to return it. He did not. he worked with him through the problem. With this said, Keith seemed to be aware of the issues and thought it could be addressed without returning the engine. Now that the engine is damaged, the the warranty should still cover it because the user was working with the factory concerning the problems that he was having.