you can ask them to do a leakdown test and put up the results here so we can look at it...sohc d series engines are a dime a dozen and i'm sure they have several just in inventory they can pull out and do a test and hold it for you to determine its in good shape

what did they suggest to do with your old engine? if they are going to keep it ask that they pay $50 for it as they are getting something for free (these aren't that hard at all to rebuild and with just blown rings and no severe scarring of the piston walls it's pretty cheap to rebuild and resell)