The warranty is the warranty, and the customer should not have to pay when parts and labor are included in said warranty, period.
As many others have said, it is not Kioti's fault that this dealer is trying to gouge you for his/her not being able to manage diagnostic time correctly. A flat rate pay for repair is just that, and Kioti did their part in paying the flat rate stated in their agreement with the dealer.
If you decide to pay, which I wouldn't, I think you should make it clear that you are not interested in doing business with them any longer, because next time, the overcharge may be much more, and you will have a history of having been a sucker the first time.
My opinion is that this dealer is either too green to know he's doing something wrong, or he's doing it on purpose and hoping you won't realize that you shouldn't have to pay anything extra.
Of course, as has been pointed out, if you signed something saying you would pay anything beyond the manufacturer's flat rate, there's no question as to what you should do, pay it.
John
PS: If I had to drive 70 miles to get further repairs, I would. That's why I bought a trailer, so I can haul it when I need to.
John