Before you let them do a teardown, insist on a full diagnosis and an estimate to repair what they think is wrong. I'm getting a very uncomfortable feeling about this shop's approach to the problem. Before I'd allow anything else to be done, other than the original transmission swap, I'd want some sort of assurance they're not just on a fishing expedition for a bigger payoff.

At the very least, I'd want to see the results of a compression test, and a cylinder leakdown check. Also get them to check the dwell and ignition timing, and possibly redo the valve adjustment. If there is something going wrong internally, one or both of those mechanical tests should show some incorrect readings. If they aren't willing to do those things, or don't know how, call a tow truck and get your vehicle out of there, pronto!
Jerry

"It is better to be silent and be thought a fool than to speak and eliminate all doubt!" - Abraham Lincoln
Cringe and wail in fear, Eloi- - - - -we Morlocks are on the hunt!
There is nothing noble in being superior to your fellow man; true nobility is being superior to your former self. - Ernest Hemingway
Love your enemies and drive 'em nuts!