I don't totally understand your logic- why not just buy a new frame and sell or keep the old one? If you take out powdercoating and shipping (powdercoating because its a pure luxury, and shipping because, as stated and I agree, you shouldnt have to pay that for warantee issues), you're left with ONE frame at a cost of 330 + 160 = $490. If you kept your current frame and simply bought a new one, you'd have TWO frames at a cost of 330 + ~330 = $660; the net effect is 660 - 490 = $170 for a new frame, in comparison to returning it. You could proably CL/EBay the wacky frame for $170 or more.

I had a similar issue with a lightly damaged old phil wood hubbed wheel I received for near nothing- I paid no shipping to send the part back, but once there, they gave me a replacement option similar to what IRO gave you, and I decided it wasnt worth it.

PS Loctite?