Labour's surprisingly cheap - once the top's off you just pull the whole thing and drop a new one in. Brand new engine is around £5,000 - I'd only be paying a couple hundred for the labour.
I also got the dealer to give me an estimate of the bike value once all work done. They said £4k private, £3.5k trade-in.
What a joke.
What the F?! Brand new engine costs £5k, but once it's on the bike it's worth half that?! No no no, to hell with them. They are trying to shake you down mate, otherwise they'd be out of business if they played fair.
Ok, this is what you need to do: go to your local bike market connoisseur and ask them for a real value estimate, not the bunch of baloney from the dealership. Seeing how they handled your problem in the first place, I'd say they don't know their as* from their elbow.
You should also visit bike markets yourself, online and offline, to feel the pulse for F800s, if you will.
Next, you should try to obtain some legal advice (of course, off the record, as it won't cost you nothing) about what your options are. You have given them a broken bike, and despite being an authorized service shop, they haven't fixed it. It was their duty to strip the engine, localize the problem and fix it, or let you decide if you want it fixed. Simply putting the bike back on the road and saying "let us know if it rattles some more" is plain wrong and irresponsible. I agree with some of the guys here you should be pushing for the whole price write off, but you should do it legally. Until you hit 'em where it hurts, they won't give a damn. They wouldn't be offering to pay half the cost if they didn't have something to hide, it has nothing to do with "good will". Trust me.
The only thing bothers me though: when you dropped it off in the service shop for the first time, did you let them know you did the oil change beforehand? If you did, then there's no excuse for what they did. Even if it took a month to diagnose the problem, they were not supposed to put it back on the road.
Stay adamant here. If you budge for a second, you'll lose.
And don't worry about involving the law. You're the victim here.
P.S. This will take some time and effort on your part, but no pain-no gain.