they finally called me saying I could pick up the new frame in exchange for the old one. I told them I have no tools to take the bike components out from the frame. Robert's Bycicle (Flushing NY) store said it would cost me $35 to do it. The salesman tried to convince me that on a recall you pay for labor
Sounds like from your original post that the shop was going to charge you $35 to take the parts off the old frame. How much did they want to put the parts back on the new frame? And did Raleigh tell you if it was the same frame that you were getting back? I find it surprising that they would have a 10+ year old frame sitting in storage somewhere to send you.
Raleigh has sold MANY bikes of a very wide range of quality. During the late 90's I believe Raleigh was going through a rough patch in its history which likely reduced the fit and polish of their bikes, while Trek was on it's way up. Be sure you are comparing bikes of the same quality here.
I doubt Raleigh is really trying to cover anything up. And even if they are, there's not much that its going to do do their reputation one way or another. They certainly aren't selling those same frames now as they were then. Probably not even making the frames in the same factory anymore. The company may not even be under the same management/ownership.