If you buy the 7 year extended, shop around for the best price. If you get the 7 year for 1300, the 5 extra years are costing you approx 250 bucks per year, which is fairly cost effective. The shorter the warranty, the more it costs per year. You actually have coverage during the first two years with regards to the things your standard warranty will not cover, like hotel/motel costs, etc while your bike is being worked on (in an out of town situation).
Also, if you ever sell the bike, the extended warranty is transferable to the new owner for a transfer fee of about 25 bucks, OR you can get a prorated refund on the unused portion.
Or you can keep your money and buy a pair of cylinders and then start collecting other parts for your future motor rebuild on the 110, after the initial 2 year MOCO warranty runs out. Add another 4-6 K to the 1300 you'd pay for the extended warranty and you'll be close to having enough for a new, aftermarket parts engine.