Poopshovel:
Referring back to "Option 3," making life difficult for the dealer, you can always take them to the BBB, Honda Corporate and the local media for fraudulantly representing the required maintenance. This discussion isn't about a part that failed, and it isn't about a part that they broke, it's about a part that they broke while defrauding their customer. This should be strong leverage.
I don't like the heavy confrontation but I had no choice when I bought the last car (which was from a dealer). After I had exhausted every other option and getting repeated run-around, I calmly, politely and patiently explained exactly how I thought the dealer was lying to me and screwing me, and that the sale would collapse if they didn't do right. It worked that time.
Do you have any attorney friends? Ask if they would, at no charge, write you an official-attorney-letter laying out the facts and how ugly "option 3" will get. A friendly attorney might do this for free, and lawyer letterhead has been known to improve negotiating outcomes. ;-)
I think it helps in any negotiating situation to have other alternative solutions so that you can maybe work around the "line in the sand," in this case the GM absolutely refusing to do a new transmission. OK, what about he buys you an extended, bumper-to-bumper warranty that is accepted nationally at Honda dealers (I assume Honda sells such a thing), and that is backed by Honda >not< him. I also like the concept of the dealership buying your car and selling you a new car at very favorable terms. Either one of these options gets you away from the new versus used transmission debate and gives you something else to talk about besides going nuclear. This gives him a way to save face (always important in negotiating) and also makes you look very reasonable and accomodating, which also helps in negotiation. Also, don't forget to mention to the GM that there are now >fourteen< pages of people following along. :-)
If you end up with the used transmission, make sure the warranty is transferable for when you trade it for a Mazda. :-)
As an aside, just for fun let's assume Poopshovel trades in his Fit on a new one. I think it would be fun to do a daily Googlesearch on the old VIN to see if the dealer discloses the car's history when it goes for sale. I'm guessing they would be required to disclose but given this dealer's actions so far they might not. And mentioning Poopshovel might do this might be additional leverage. Dealer might be able to auction the car as a work-around but I don't think they'd want to do that.
Poopshovel, good luck. I hope you get this worked out. It's a double-bummer when it happens on the car you want to be 100% for your family sake. And I would repeatedly mention the "family car" angle because it should hit a Honda dealer where it counts.
David