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Seems to me I'd try the route and do the Goodwill thing with GM....when you make your case only stick to facts as I DO understand it will be hard to keep emotions out of it....it should NOT have failed.....it was kept up with it's oil changes right?
When you do this think out exactly what you want them to do (keep emotions out) and be factual. State that eith you want engine provided and you'll pay labor or you want the whole thing done....whatever you can live with. But when trying this just remember that there's no place for emotions in neogations of this sort.....I would think that getting them you meet you in the middle would be the best play here....worth a try....
if not, I would do what some of the other guys have said here and go to after market and have the engine forged.....you can build a VERY solid engine for that money....remember with this course NOT to go overboard.....your vette is set up for the power of your current motor....installing a monster will cause you MORE headaches unless you spend even more money.....if ya go this route shoot for a "solid" engine rather than a fire breathin monster unless your going to build a "whole" package which will be alott more money and you'll still have a '06 coupe with a lot invested.....good luck....
Another thing to think about in regards to a new motor is how many of the old parts are going to be reclaimed and installed on the new motor? Alternators, water pumps, power steering units, air conditioners, etc all have 65K miles, how much will be transplanted. Another thought, how long do you intend to keep driving the car? If I were in this situation and I loved the car and didn't have any thoughts of selling, I would look hard at the LS-3's and going that route. If you buy much more horsepower than that you start to run into drive-line issues. The LS-3's are pretty sweet running motors, good for a DD and fast enough to get your undivided attention. Maybe convert to the NPP exhaust too.
$10,000 does seem high as others have said for going back with an LS2, I just did the LS 3 376 create motor for 10 large installed by the dealer, 2 year waranty, like RLSEBRING did. I would recomentd for an automatic, idles a little rough and it like a little throttle, be a little rough with an automatic, like RLSEBRING says. It does sound good though!!!
If your interested in used there are a couple of forum advertizers selling used LS 2s for a decent price.