Advice handling damaged transfer case - 2012 Ford Expedition

2012 Ford Expedition EL

I do not have the experience setting up gear lash, so I brought my Expedition to a reputable off-road shop to install a limited slip (Eaton TrueTrac) and electrical locking differential (Eaton E-Locker) in the rear and front differentials respectively.

I supplied parts, as they were on long term backorder from the manufacturer. Because I supplied parts, I acknowledged in writing that I agreed that there would be no warranty expressed or implied on this work order.

Received the truck back and noted two items, minor noise from one differential (Presumably rear, but hard to tell) and minor leakage from the transfer case to rear driveshaft output seal.

Generated a new work order to make an adjustment on the rear differential pinion preload, replace the transfer case rear output shaft seal, and change transfer case fluid. I was billed for 3 quarts of fluid which sounds reasonable.

This was in January with ~179,200 miles on the clock. I was told to come back in 500-1000 miles to recheck differentials and their oil.

Throughout January and February, I drove in mixed 2WD and 4WD modes. I had a good experience with the lockers in the snow, as they improved traction GREATLY.

March, I volunteered to tow trailers of mulch for my kids' Scout Troop fundraiser. When fastened to the trailer, I noted additional noise from under the truck. (Varied with speed, sounded like a growling gearbox.) Truck also felt sluggish.

Attempted to shift to 4wd. Front wheels locked up.

Shifted back to 2WD and crawled under the truck to inspect. Transfer case was EXTREMELY hot to the touch and burned my hand versus the transmission and engine oil pan which were warm, but I could keep my hand on them without injuring myself.

Decided to pull the drain plug on the transfer case. a little less than a quart of watery black fluid that smelled like burnt death came out complete with glitter. (I saved this in a clear plastic bottle.)

Currently ~179,800 on the clock. It appears that I put about 600 miles on the transfer case with an inappropriate amount of fluid in it in varied driving conditions.

I have approached the shop and the management insists that they filled the case, however appears willing to work with me on replacement. They planned on supplying a low mileage used case. However scrapyard parts have unknown history.

Because I have rebuilt axles, I believe I'd like a completely remanufactured case. I would be willing to pay the difference in price

Does it seem reasonable for me to eat the cost on the remanned case and the shop to eat the cost on labor for a transfer case replacement?