Perplexing 4S Water Issue

My wife's 2 week old 4S got some water splashed on it. Not dunked, not soaked. It was being charged at the time. Pulled it off charger, shook the bejezus out of it, and into the rice it went.

Started it up a couple of days later and all was well for a bit, then it lost it's signal (searching....). After trying to update it, it got stuck in the "Restore" loop where it kept asking to be restored before updates could be installed, but the reset always failed (Error 1).

I ended up taking it to a local repair guy (recommended by manager at AT&T). He now tells me, for the life of him, he cannot see any water damage/indication of water damage. Unfortunately, he has no idea of what is going on.

Now I don't even get the screen showing the iTunes logo w/ the cord leading to it, just the spinning circle of death.

Repair guy said I should just try my luck w/ Apple since there is no water damage. Tell them I tried to update and it died. I think I would try this tack, but my wife, in the meantime, called Apple about the water and found out she could swap for a refurb (out another $200). They got her phone # and email, but not the serial number on the phone.

Any thoughts on what to do? I'd hate to shell out another $200 bucks on a refurb, but I also don't want to get burned by Apple for not disclosing the water issue.

-DJ