Wow... interesting dialog....
So, this will answer a bunch of the feedback....
I was actually more proud of my daughter calling me at work to own up than I was mad about our new toy getting broken. Being the generally honest guy that I am (yes, I still make mistakes, but I do own up to every traffic ticket etc.) I called Apple and told them exactly what happened. They said the repair bill would be $299 and I'd get a new one (refurb I presume). He OFFERED that I could still get applecare+ (not fraud) and then the repair would end up costing me $149 instead of $299. Given that we broke it and it was in no way Apples fault, that seemed reasonable, so I bought the Apple care. I would have loved to have them do for free given my many Apple purchases (currently 3 phones, 4 imacs, 1/2 dozen ipods, 2 ipads), but since is was our fault, I didn't try to get something for nothing... They can afford it a lot better than me, but its an ethics thing.....
As a former machinist/fabricator/engineer, i'm pretty handy, and while on the phone with with Apple and using various little tools I have, I was able to demangle the case to get the volume button working (no, I didn't open the case). Doesn't look good and I'll eventually turn it in for a new one, but for now we at least have a working machine that still looks fine unless you look at the volume button...
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BTW, for me there is no "technically" in honesty. You either are or your aren't. Its not the letter, its the spirit.... I totally owned up, and they gave me a fair deal. One good turn deserves another. Ocassionaly I get burned, but at least I know I did what's right....