Agree that the whole "extended warranty" thing is normally a scam. Just out of interest, how much extra was the warranty and what were the conditions attached (required service intervals etc). I would think a busted spline would be a fair claim regardless of how it happened. You in the Western Suburbs of Syd? I can recommend Marko's in Penrith. As mentioned $1700 should be close.
Just be thankful its not a Land Rover Disco 4, Mate of mine has just has a reco box for a 3 YO (150K) done - (ZF 6 speed same as the Territory) and it was $8K fitted! The kicker was they pulled the box and found the transfer case had water ingress and the input spline was welded on the output from the auto. Throw in another 4.5K for a total repair cost of $12.5K YIKES! He has just taken the family out to Poppels Corner (where SA meets NT meets WA). Hope it hangs together!