Dropped Engine

I think that's the best scenario. Years ago I was working weekends for a shop and dropped a fully machined block - it broke the ear off the trans mounting boss below the starter. Luckilly I happend to be into Mopar and could replace the block. The shop machined it and that was that. It's unfortunate but as long as you can make peace $$ wise with yourself and they provide the high level of service you've had things can move forward.
On the "too bad" note - it sounds like a good one. There's substantially good value for a guy willing to take it apart and check everything and you're leaving room for parts replacement if needed.