I'd put my money on the part I've marked in bold. My guess is that they actually DID know why, were only SAYING they didn't, and are using that plausible denial in tandem with going ahead and rebuilding the engine as a way of saving face. They've not actually admitted to any mistakes, but the fact that they're rebuilding your engine again makes it seem pretty clear that they know some sort of mistake was made during the rebuild. (Then again, maybe I've become a tad overly skeptical in my old(er) age, and possibly see plots sometimes where there actually are none.) Or not.
If that's what's happened, there's obviously no use in suggesting it now and taking the chance of putting the shop back on the defensive, so if this second rebuild goes well and you're both satisfied with the new outcome (and billing)...like it's always suggested, some things are simply better left unsaid (especially since I could also be totally wrong in having suggested that the engine failed because of an error on the part of the shop in the first place).
Whatever the case, sounds like things are headed back in a direction that will allow an acceptable outcome for both parties, so I hope that progress continues.