To answer one of the questions, the explanation for it lasting to 133K miles, is I don't haul heavy loads, or pressure my truck at all. In fact, several friends asked why did you buy a 3500 for what you use it for. Overkill I guess. The defects are deep enough that you can feel them with finger, and finger nail easily catches on them. A machine shop in Jackson, that I am told is highly respected, said from the pictures and description, that they could not repair the block without altering the pistons, etc. I really don't believe the Diesel shop was trying to hit me up for more, since they already were aware I was in conversation with Chevrolet customer service and considering towing truck to dealer, which I did. The Diesel shop had no problem with me pulling it from their garage to take to dealer. I could be naive, but I really don't think the engine would have survived 133K if I used it for what it was made for, in the first 5 years.
Again, thanks so much for all the information, recommendations and suggestions! You all are fantastic at quick replies and knowledge of issue. It gives me some sense of relief hearing all of this information.