Aren't you better off with a refund? You can then buy another 770 and get a full 1 year warranty, or buy a N800 for $40 more, or spend the cash on something else entirely.

It is odd that Nokia can't repair or replace it - does this suggest 770s and their parts are in short supply? Or maybe this is Nokia policy to refund rather than replace, with the side benefit being a potential migration of 770 users to N800.