More correctly, a service agent's words. Not Apple's, per se. Here are Apple's words on AppleCare replacement units:I understand what you are saying. But I'm relaying Apple's own words. Not mine.
"(b) exchange the Covered Equipment, with a replacement product that is new or equivalent to new in performance and reliability. "
And that's it. Besides, tossing the externals and keeping the internals sounds bass-ackwards to me. Why on Earth toss a flawless sapphire screen/ceramic back/SS case when it is the internal guts that is usually the problem issue for watches/phones/pads with non-physical damage? Heck, the internals are probably pennies at this point compared the cost of the materials of the rest of the watch. I would bet good money that they have a contractor who disassembles all returned watches, bins out the parts into great-good-bad buckets, then they reassemble (or remanufacture if one prefers), test, and distribute the units to warranty claims. And there's nothing wrong with that, IMHO. Get a dog, Apple will make it right (just like they do with an original purchase).