Harley owner's usually wind up paying through the nose to fix Harley defects, first by handing over a couple grand for a service contract and then by spending a couple grand for the "Harley Tax" to make the bike run as well as the competition does right out of the crate. At what point do you guys decide to stand up for your rights? Yes, the part is only $12. Many of us have justified to ourselves spending a lot more than that to fix defects rather than fight with a dealer and the MoCo, but in the long run we just made it easier for those folks to continue to sell us crap and treat us like chit.
Anyhow, before I'd just meekly walk over to the parts counter and buy a part to replace a defective one that's definitely a warranty concern, I'd at least have a chat with that SM and make him explain exactly why he's being such an ass. If this guy was really as good as the OP says he has been to him, he wouldn't be pulling this chit. What has changed, and if the OP caves on this what will this SM try to pull on him next time?
To each his own, but in my opinion there comes a time when we have to stand up for our rights and not just let people take them from us without a fight. Maybe for the OP this is the time, and maybe it isn't. Only he can answer that question.
Jerry