Sounds like your Wal-Mart ia jacking you around. Sorry to hear. The manager honestly probably has no idea what he's doing and just wants to leave you high and dry because he'd rather not fiddle with a major return like that.
As stated, if you still have original receipt and paperwork that came with the mower, you can register the engine anytime with the motor manufacturer, and then file a claim through the motor manufacturer's website.
If they tore it down, get a complete synopsis of what's wrong with it. Register the engine first, then file a claim. They will ask that you take it to a registered mechanic for their brand. As long the Murray people are registered, the engine manufacturer may honor the claim with the repair shop's estimate.
Hope there's a positive ending to this rather crap situation.