Sounds like the tech that set-up the bike did a poor job. Even the cheapest BB should last longer than 250 miles. If that is all you got then you should be able to get it replaced under warranty.
That said, I use an '03 XT crankset and think it is just fine. Have scarred my shins many times on them and hasn't hurt them at all. They are as good as new and I now wear shin armor.
As far as length goes, 170mm is the crankarm length and is generally for us smaller of leg folks (31" inseam here). There are several threads here that will tell you about getting the correct crankarm length. Do a search on same and you will come up with a dozen and more info than you ever wanted to know.