I'm thinking cheap and ez. Did they check for a collapsed lifter in that cylinder? That could also cause a compression loss and it not necessarily be bad cylinder. I would ask them to pull valve covers and check all cylinders before saying "engine bad" but that's stealerships for ya..
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yes yes because when there footing the bill for a new engine boy to they make dam sure the ***** needs a new engine they sure as hell made me jump thru hoops
years ago i bought a 98 s-10 brand new and about 9000 miles later i was driving home one night and the motor was rattlin like crazy it behooved me to pull over and check the oil duh duh duh there was no oil in the basterd so i took it in the next day the dealer had it over night did a compression test one of the cylinders had like 40 psi when the rest had well into the hundreds
now the service center at the dealer ship made me do an oil consumption test every 1000 miles for 3000 miles before theyd consider replacing rebuilding once i finished with this "oil consumption test" i got the runaround for about a week or two something about warranty authorization on replacement engine we had to threaten legal action to get them on the stick
i had a brand bew block put in at 9000 miles on the odo and my warranty extended to 60k miles