I'm gonna throw my 2c in here, not trying to be a dick...
I understand that you upset about the situation, but to me what the warranty company offering is fair. They are there to guarantee you are made "whole" again if something happens to the bike. Getting a brand new engine is beyond "whole", considering the one that broke had 10,000 miles on it. I'm sure if you read the contract it states that them installing used parts is acceptable. It would be similar to expecting an insurance company to buy you a brand new car after your 2010 with 10,000 miles on it got hailed out..
However, assuming that the existing warranty hasn't expired since the engine blew, the 3 month 4000 mile warranty thing is BS. The installed parts need to carry the same warranty as the rest of the bike.
My only other bitch with the whole thing is the value of the replacement parts. I have a hard time believing that the cost of a replacement engine is $6,500. And it isn't EBR's responsibility to stock new engines for them, it is HD's.