[blazes9395]

Yeah its very likely the oil filter was bad and since it wasn't replaced, could have easily caused damage to the engine. Make sure the dealership gives you written proof of what their intentions are i.e; they want to put a used engine in it. This type of proof acknowledges that they may in fact have been at fault for wrecking your engine. Its good for court purposes, if need be. After that calmly explain that the engine was damaged as a result of poor workmanship of the mechanic at their dealership(don't say any more, just whats required), and as a result of that, you will not accept a used engine, and want a gm rebuilt or if you really want to go for it, a new GM engine. I personally would go for a new engine, but their rebuilds are alright too.

Since they have offered you a replacement, they basically have accepted that they may be at fault for your engine going bad, don't let them off the hook with a used engine. They are offering you a used engine in their hopes of you accepting it, and saving themselves some money.

Good Luck, and don't give in !