Ya, that dealer is trying to bend you over backwards. As the others said, shop around for an engine on your own and get a private shop to do it.

I doubt hunting down the seller will help much. In all honestly, a lot can go wrong with a used vehicle in 10 months and they will use that as their weapon of choice. Your situation is the suck and won't be cheap, but you can at least always go cheaper than that bloodsucking dealer.