Not to argue, but I did understand what you had said and my point was that even though only one set of bearings were damaged, you have no idea of the other collateral damage that has happened to the gears, shafts, etc. I am in no way taking anything for the quality of the basic machine. Lack of lubrication will ruin the very best of machinery. When it overheated because of lack of lubrication the total sum of damage is beyond what you can see. If it were mine, I would want the entire gear box replaced. If they say that it will be as good as new, then suggest that they install it on another new machine and give you the gear box from that machine.
I had the same thing happen to the transmission/differential on a Corvair back in 1963. The dealership replace the bearings and put it all back together. About a month later, the counter shaft snapped in half. Once again, it was replaced and put back together. Then third gear came apart. This time, I said that I wanted it replaced in its entirety. The dealership didn't agree, but the Chevrolet factory representative did and they replace both the transmission and differential. On a Corvair, they are mounted together and share a common oil sump.
As for who is responsible for the damage, I believe the dealer is responsible because he has the primary responsibility for making sure that a new product is ready for operation when delivered unless it is sold through the parts department and you do the final assembly...