VW GTI Car Trouble

About 2 weeks ago on Friday I had a some car trouble on my way to work. The car stuttered while in cruise control and it felt like I had lost most power. Thankfully I was less then a mile from the office and managed to limp into the company parking lot.
 
Knowing something was wrong I asked a co-worker of mine who had previously been a mechanic for his thoughts. One of the perks of working in the manufacturing industry is the variety of both blue and white collar employee's.  He suggested we check the engine codes using a ODBII tool he just so happen to have in his car. It showed a series of engine misfires.
 
Not being a VW expert he suggested I have the dealership take a look at it. After a quick call to the dealership and asking if it was safe to drive I headed up the highway a few exits to the local VW Dealership.  I met my parents there who were kind enough to lend me a car for the rest of the day so I could return to work.
 
They diagnosed the issue as a failed fuel injector and unfortunately they didn't have the part in stock and would not be able to get it until the following Monday. With no real option except to wait until the car was fixed I was stuck with no car for the weekend.
 
Monday came and the fuel injector was replaced by 12:00. Unfortunately after replacing the fuel injector the car was still running rough and still misfiring. With the car not running as it should they continued to diagnose the problem and by about 4:00 and not hearing from them I called again. This time I got even worse news. The engine had a blown piston as it was described to me and would need to be replaced and that it would cost an estimated 6,000 to repair or 5,500 to replace on top of the 550 it already cost to replace the fuel injector. 
 
The service department recommended that I trade the car in rather then replace the motor. Not ever having any reason to not trust them they called up to sales and asked them to give me a call to help move the process along.
 
This was a huge mistake. After several wasted visits to the sales floor and them unable to give me any concrete answer to what they would be willing to offer me for my car I got frustrated and decided I would investigate the alternative to repair or replace the motor.
 
Not satisfied that they had properly diagnosed the car and wastefully installed a fuel injector that I wouldn't need if I traded it in or replace the motor I had a less then friendly conversation with the service department. Only after speaking directly to the technician who did the work did they admit that with a little more testing they would have been able to diagnose it was more then a fuel injector. During that conversation I manged to get them to drop the cost of repalceing the motor from 5,500 to 4600. I didn't give them the go ahead since I still thought it was too much.
 
This process took over a week and was annoying so I began calling around to other repair shops. All suggested that the cost from the dealer wasn't just high but outrageous. I confronted the dealership about the excessive bill and they offered to remove the fuel injector and the charges and let me take the car anywhere I wanted.
 
I offered them one last chance to match a price of 3,200 I had received from a local repair shop. They managed to drop the cost to 3,800 + the 550 I already owed them for the fuel injector.  Not satisfied with their counter offer I asked them to remove the fuel injector as they offered and let me know when I could have the car towed from their garage.
 
Now over a week since I first brought them the car I called AAA and scheduled the pick up of my car. It was like a circus at the dealership with everyone watching from the repair department as my car was loaded on the flatbed.
 
For the first time since the start did I feel like progress was being made. I followed the flatbed to the new repair shop and met the mechanic who would replace my motor. He was younger then I had expected but he clearly knew what he was talking about and told me he wanted to take the rest of the day to do his own diagnosis and would call me in the morning to let me know what he thought my car really needed.
 
When I woke the following morning I was waiting anxiously for his phone call and he didn't keep me waiting. Unfortunately the news was not good and the dealership's insistence that the car needed a motor was accurate. I never particularly disputed their diagnosis just the cost to fix it and the hassle to get them to give me a true estimate to repair. He spent the rest of the day sourcing the best motor for my car at the most affordable price. He managed to find an engine that was a tad cheaper then the first quote and reduced my repair cost from 3,200 to 2,900. a bonus 300 savings I didn't expect.
 
Once the motor was picked up he began the process of swapping the motor out. He suggested I stop by anytime to check on the progress and see how it was coming along. Today I stopped by for the first time and won't lie I was a bit overwhelmed. I found my car with the entire front end apart and the motor in pieces. 
 
Chris the mechanic could tell that I was a bit overwhelmed and assured me that what I was seeing was progress and that by Monday it would be all back together and running better then ever. He also took the opportunity to show me the failure on my old motor.
 
I have attached the pictures below. On Monday hopefully I'll be able to update that I have my car back and that everything is working perfectly.
 

The first pictures show the piston with several contact marks where it had somehow made contact with the exhaust valve showin in picture two. I asked him what was the likely culprit and he indicated it was tough to say but thought it was most likely the result of the timing being off.  I just had that done about 2 months ago but unfortunatley he said it is nearly impossible to prove that was the cause.