It does make sense that Jetboil wouldn't want to send back an unsafe cup, however we're free in this country to make unsafe whatever we want. If I mod my motorcycle to stunt, then take it in to the dealership under warranty due to a broken fork, I can understand them not fixing it, but they'd be crazy to think they could take and keep it, right? If they want to shield themselves from liability, I'd be happy to sign a document absolving them from responsibility. That or send me a safe replacement.
That said, I think it'd be fair to expect a refund or be offered to purchase a new unit at the difference between their wholesale price and their manufacturing cost.
They currently have my stove, cozy, lid, and bottom cup which they are shipping back. Once I get those back I'll take further action. The refund would probably be my first request as I haven't asked and they haven't offered. If that falls through, then maybe I'll try more "leverage".