I’m really sorry that this happened. Terrible circumstances! Unfortunately, I don’t think it would be worth your time fighting this one through the courts.
1) i’ve seen it before many times when doing an appraisal and the CARFAX report is clean. Then, in some cases (even months later), then frame damage will show up on the CARFAX. It’s actually very possible that the dealer didn’t even know. One of the main reasons I always suggest buying CPO (when used), is the inspection is quite thorough. I think there is a high likelihood the dealer may not have done anything wrong.
2) if the dealer decided to fight this, their legal counsel is probably quite strong, especially if they are a publicly-traded company or a large dealer group. Not only that, but their council will be specialized in dealership related law.
From everything that I’ve read, as unfortunate as this is, I don’t think you have a case to fight.
3) if there is proof that the engine was repaired incorrectly, causing the rod to bend, there may be a warranty period on their work (12-months?). From the way I read it though, it seems that it may just be speculation/theory about the cause of damage. Although likely true, not a silver-bullet.
To be completely honest, I (my previous dealership) actually was sued about 12 years ago for a similar instance where Frame damage up here on the Carfax report after the time of purchase, we typically wouldn’t have fought something like this, but because the customer bounced their check, we knew that they were trying to get out of paying the balance due. In any event we ended up winning, because we had no knowledge before or after the Carfax was changed. We were very thankful that our technician filled out his inspection paperwork perfectly.
With that said, If this were to happen in today’s day-and-age, being a general manager of a large dealership having a lot more experience than back then, I would do whatever it took to trade the customer out of that vehicle and eat the loss on wholesaling it or sending to auction. Not going to court.
The best advice that I can give you is to verify whether the frame is really damaged or not. If it was not structurally damaged and reported as an error, then you could challenge the Carfax and possibly have it fixed. I could help you with this (call anytime).
The only real weapon you have (the way I see it) is social media. However, I would not use it without going through a face-to-face meeting with the GM of the dealership. He/she may be a stand-up guy/gal and work with you. I can tell by your posts, you are very kind and level-headed person and that will take you a very long way (vs the opposite, which will not).
Be willing to compromise, if you are, they probably will too.
Good luck.