If you remove the oil cap and look down inside the engine, you can actually see the timing chain. If you have an interference engine, a piston could have bent a valve, even when just turning over on the starter. This can often damage a piston and cylinder wall right along with bending the valve. Again, I have no idea if the Escape has an interference engine or not. (I should look into it as I have a 2005 Escape) An interference engine is one when there is no room for an open valve when the piston is all the way to the top of its stroke. In normal operation, both valves are always closed at that time. A broken chain can upset this timing and cause this condition. The rising piston can then hit an open valve even when just being turned over on the starter. This was a real PITA with the older timing belt engines. If you have valve, piston and cylinder wall damage, I may be in agreement with the dealer but I wouldn't jump to that conclusion just yet. I would say that you should have a competent mechanic take a look see. An illuminated fiber optic type scope, very similar to what Doctors use on us, can be used to inspect the cylinders via the spark plug hole. It is my opinion that this procedure would be well worth the cost as then you would know what you are up against. Good luck and keep us posted.