Lyn,

Well Jeff definitely had another very informative post, between that and the others that have contributed, I think they pretty much covered all I had to say.

Except, has the work already been done... Or is that a tentative estimate, either way, what was/or is going to be the extent of the repairs? It won't give you much ammo to fight the warranty company, but to me, I seems incredibly unlikely that you'd actually end up hydro locking the engine to the point of engine damage from condensation. You'd need a pretty substantial amount of fluid to do so, my friend ended up sucking up a lot of water after driving through a big puddle (with a CIA and on a completely different car) and ended up only bending one of the connecting rods, a big deal none the less but something to put it into perspective.

What exactly is wrong with you car? Does it run at all? Blue smoke, lots of steam? Pissing fluids out from the engine? If it's something small that isn't effecting the drivability of your car, I don't see why your mechanic couldn't use compressed air to blow out the oil passage, or you taking your car on good drive to clear up the condensation, unless of course your engine is definitely hooped... My two cents, hope that helps...