What kind of mileage do you have on it now? I don't know how the lemon law works where you are but you might want to look into it. Generally you can't force a dealer to buy back the car if you've only had one problem...even if it does mean taking the motor apart to fix it. As far as the repair goes, did they mention anything about honing the cylinder? If the lining is scored that leads me to believe they'll have to resurface it. Theoretically the motor will be just fine, but the fact that it's been cracked open to fix something will be a deterrent to someone a prospective buyer down the road.

Once again I'm not well accquainted with warranty issues (what with working on/driving older cars) so well, I'm not much use.