I am the owner of a 1998 Dodge Durango. I have had engine trouble with the vehicle at only 5,000 miles. The 5.9-liter V8 was found to have two faulty valves and valve springs. The trouble happened without warning even though the truck has been maintained properly. Since the valve replacement I've been averaging 6.9 mpg for the last 500 miles. Have you heard of any inherent engine problems with the 5.9-liter? The service center told me that engine replacement was neither required nor available to me for such a problem.
I ran a technical service bulletin search and came up empty as far as any common valvetrain problems with the 5.9-liter or members of its immediate family are concerned. We also did a little behind the scenes research with Dodge. The bottom line is that something would have come up if a serious valvetrain defect were an issue at this point.
So let's assume that the engine failure your Durango has experienced is a one-time thing. The description of a simultaneous failure of two valves and valves springs still leaves us with a lot of questions as far as what exactly transpired. Regardless, the service department was in-the-right by not replacing the entire engine, and hopefully the technician involved did a quality job on the needed repair.
You can understand how it would make little sense to replace an entire engine assembly when the problem can be corrected 100% by simply completing the necessary work to one cylinder head. This type of repair should have no adverse effects on the bottom end. Now, if we were talking about launching a connecting rod through the side of the engine block, that would be a different story altogether.
Before going back to the service department with the fuel mileage complaint it would be a good idea to double check the accuracy of the 6.9 mpg that you came up with the first time around. The EPA estimate of 12mpg/city and 16mpg/hwy on the 4x4 Durango certainly doesn't leave us in the econo-class, but 6.9 mpg most likely would have shown symptoms of poor performance and/or lit up a Malfunction Indicator Light.