mbeach, the rings they are refering to are compression rings. the #1 ring meaning the top compression ring and the #2 ring meaning the second compression ring.the change in procedure is more than likely to be from a change in there supplier.and neither one of these is an oil control ring.
and the continued operation just means that after hearing the noise you did more damage by not shutting off the engine.you did nothing to prevent further damage.if it was me i would more likely prove to them that it did not matter that you drove back to the dealer because once the bearing spins the damage is done the crank is toast.they have a similar clause for boats that have sunk.if you do not do anything to prevent further damage they will not pay.an example is not removing water from the engine thus damaging it further. shawn