got14u,
Sounds like they are trying to keep your business. I, as well as others here I'm sure, have been in the fabrication business and especially in a job shop type of business things can go screwy and you need to "fix it". It will definitely cost you time and money to do so but I'd personally rather deal with someone that is willing to admit and fix their mistake, at their own cost, than someone that would just say "oh, well - sue me." It us usually not worth the time, effort, and aggravation for most people to do it and companies know it. A good reputation cannot be bought, but it must be worked on constantly and consistently.
While I don't know the details of your agreement over how your pit was to be painted it sounds like there may have been details that were not covered in what you wanted. It may have been that you assumed that they would understand that you NEVER paint the interior of a pit but if they have never done one before they may not have been aware and to them most parts are completely painted to protect the metal.
I think they are trying to do right by you, I know it has been upsetting for you but try to put yourself in their shoes and what would you do to keep your business. Sounds like they are trying. Personally I'd give them a second chance if they get the redo right.
Just my .02.
Blessings,
brotherbd