That's too bad. What does their warranty specify? Are they actually members of the BBB? I have filed complaints with members of the BBB in the past, and they only have the ability to make it correct or get an unfavorable mark in their history. Did the AG really seem interested with this case? I can't see them getting involved unless there is criminal intent or an egregious offence. It sounds like you have done your homework. Have you considered taking them to Small Claim's Court?
Regarding the bashing comment, when a first poster comes in with unfavorable comments towards a specific product, a moderator has to determine the underlying motive as to why this is being posted, and is normally deleted. As they say, for every happy customer is another who will be unhappy. I didn't want to delete the posting, because it may help others and we may also provide you with ideas you have not thought of. Bottom line is we would like a mutual dialog, so we know what actually happened.
Good luck, and please keep us informed. Also, please post a few pictures for us to better see the problem.