Dealership service extremely generous or did they goof?

A bent piston rod only occurs when enough fluid leaks into the combustion chamber that it prevents the piston from making full travel. Because of this, not all head gasket failures cause a rod to become bent, and usually, if the gasket failure is discovered early enough, there's no additional damage other than needing a new gasket.

The majority of times, a bent connecting rod will not be found until the engine's head is removed and it is discovered during a deck height check, where one at a time, each piston is brought to its maximum height and is measured. If the rod is very bent, the difference in piston height may be visually noticeable. There are a handful of threads on this site where a owner DIYed a Gen 3 head gasket, never made these measurements and then found the engine ran like crap after the repair. Then another teardown would find the bent rod. There's also several threads where the owner found the bent rod after head removal due to noticing the height difference.

Some engines, you can make this piston height measurement without pulling the head off, just by inserting the measuring tool through the sparkplug hole. I'm not sure this can easily be done on a Gen 3, but it's nice to do before a teardown.

Some engines can have a new rod/piston installed after removing the head, even while the engine is still installed in the car, as long as you have sufficient access to remove the oil pan, etc, to get to the bottom of the connecting rod to remove the fasteners. Then you can push the rod and piston rod upward and out of the cylinder. After verifying the cylinder is ok, the new piston/rod is just inserted into the cylinder and fastened to the crankshaft. As long as it's a basic OEM engine assembly, an OEM replacement should be good enough for the engine balance to remain tolerable.

You DO NOT want to put a new gasket on an engine with a bent rod and then try to actually use it. The engine will run like crap and that rod will likely try to take up residence on the outside of the engine block.

The dealership was just trying to build some goodwill and also prevent their name from being dragged through the mud. If they agreed to just install a new gasket and give the car back to you, it would have been a crap job and resulted in an unhappy customer. They have no idea how you would react or if you would badmouth them, etc. They took the high road and probably installed a new piston/rod and ate the cost. For them, I'd be surprised if the part cost was more than $75, and a couple hours labor at the most, since the top of the engine was already torn down.

 

what was the final outcome? a new engine for 4k?