Yeah it sounds like the LBS is incompetent. They should be able to identify the problem and fix it on the spot OR submit a warranty claim to Specialized.

Most reputable LBS will know the warranty claim will be approved so they'd go ahead and fix the issue right away with their in stock parts (assuming they have them on hand) then they'd deal with Specialized to get reimbursed later.

I'd say get a refund if you can. Sounds to me like it's a shady and incompetent LBS so I doubt they'd offer you one but if they do, take it and run to a different LBS as fast as you can.

Good luck!