Opinions please

I got too much skin in the game to just let him get away with it now. The guy is gonna bad mouth me either way, so I am hangin on to the engine. I have the tear down labor, plus I've knocked the cam bearings out and freeze plugs and all the pipe plugs. It's ready for the machine shop. No way in hell is he gonna pay what I have in it now, and I am not just going to give it to him. I've been talkin to a few other people that know him and they all know how he is, so I am not worried about my reputation. lol
You got it figured out. Give the jerk the bill, whether he pays it or you keep the engine, BUT get him to sign for all this to protect yourself. You could find yourself in small claims court, so best if you have some documentation.