Many, myself included, see the extension of a warranty as an indication of the quality. If a company is willing to outright replace an engine they must have some faith in their own work... and I don't think anyone plans to USE a warranty if they can avoid it.
When faced with having to deal with shipping an engine versus just drive it across town, it can be easy to feel like going with a local shop would make life easier. So it's not as insane as it sounds.
But Johnny makes it obvious that they really want to make things right, no matter what. That matches my experience too. I think if the OP takes them up on it, he'll eventually be glad he did. If OP decides to go some other route, it would be a disservice to BPE as much as the OP because there's something to be learned from every failure.
