Your transfer case wasn't bad enough to notice when you drove it there and they didn't notice it on thier supposed test drive so I'm thinking something happened to it becasue of the engine swap (dangeling, bad angle etc), lack of fluid ( that they should have checked) or because of trauma to it by the FU'd engine.
At least they should give you the parts for WAY closer to cost or write off lots of the labor.
I might argue that I have seen many of those aluminum chain drive t cases take a crap with no warning. it is an older truck you did right getting all the wear parts replaced with the engine. when I was in Iraq I wouldn't replace an engine with out replacing all the hoses and cooling pack. my team was the only one that didn't loose an engine when summer came around.
if you do the t-case you might want to do the trans and torque converter than all your high dollar bases should be covered.