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I understand what you are saying. But I'm relaying Apple's own words. Not mine.
More correctly, a service agent's words. Not Apple's, per se. Here are Apple's words on AppleCare replacement units:
"(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).
 
I'm one of those that bought a refurbished SS series 2 that came with a small dent at the edge of the casing, near the screen. Definitely appeared that someone banged it into something and returned it. I haven't had any issues with it, and I was told by Apple's customer service that it would just be a crapshoot if I returned it and ordered another. The rep told me I could get one better or worse. I just left it alone.

I'd never gotten any other refurbished Apple product that didn't have the entire outer casing replaced.

Glad that the OP got things straightened out and had a good ending.
 
It looked new to me but probably not, but very happy then went from a generation 1 to a series 1, so far the speed difference is very noticeable I'm finding, and the battery life is much much better, a) as it's new I expect, b) better power saving on new chip?
 
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