break in period is 1000 miles less than 3500 rpm basically just cruise it. i can't really say if thats right or not for a good break in but thats what the dealer says on all new cars.
as far as break in periods go what is "broken" in is the crank bearings, wrist pins, and rings seal up. when you first drive a car with no miles on it, it will act like it's missing, no power, very muffled and feel just plain dogged out until a few hundred miles. this is VERY important on rings having a good seal. you can tell when it "breaks" in cause it will start revving easier and shouldn't blow any smoke cause the rings are sealed. improper break in can scar the cylinders, crack a ring or spin a bearing on the crank. when i used to race motocross when i was a kid i changed my rings out on my KX 80 and 125 once a month (actually ring and piston) and you could really hear the difference in just a few hours of putting around and feel the difference in power.
on the other hand with our top alcohol dragster the motor is rebuilt after every pass. only thing that is not done (usually) is pull the pistons out. everything else is changed out besides the intake, blower, and heads. all the main bearings are changed heads pulled to look for any burnt pistons basic general check mic'ed and put back together. the only "break" in it gets is about a 15-20 second start which we call a warm up to put some heat in the motor. it is revved up to around 6000 rpm sometimes higher depending on how much heat we need in the motor for the run. i talked about when i first got my C-4 and had to "re-break" her in. basically it was the same deal. the car was never ran hard, had low miles, and acted like a fresh motor. all sluggish, very doggish with not alot of power. after a few hundred miles she started to open up and i started to hammer on her and could tell the difference before i did a complete tune up. i wanted to "re-break" her in before i did the full tune up and trans fluid/filter change.
my guess is when it blew up it didn't blow up like most of us would think a motor would blow up. it probably spun a main bearing or cracked a ring and blew big time smoke. it's not uncommon for this to happen. this doesn't mean the motor wasn't salvagable but to the dealer it was probably cheaper to just replace with a new one than spend the labor costs on getting everything tore down, machined, and put back together. just like if you bought a crate motor and it blew up. you wouldn't just return the spun crank and send them the bill for the costs to fix it. you would return it and they'd send you a brand new one.
if the car was driven semi easy the first few hundred miles i'm sure it's ok best way to find out is just check it out, fire it up, let it warm up, and then look for any leaks, listen for any valve tapage, and look for smoke. after it cools down open the hood look for any visual leaks in the engine compartment then pull the dip stick for both oil and tranny if it's an auto, look at the color of the oil/tranny fluid, then smell it for a burnt smell, and then run your fingers down it feeling for any metal flakes. also look at the end of the dip sticks for discoloration. if the metal of the dipstick(s) is discolored with a dark color it means between fluid changes was way beyond the recommended maintenence schedule. this will give you a good indication on the life of the tranny/motor has left. check the radiator coolant for rust. 2 more things to look for is look up under the car at the shocks look for heavy grease or sludge around the shocks themselves. heavy sludge could mean a bad shock and also look up into the back of the tire (rims) for any sludge there also. if you find some there means it's a leaky caliper and that isn't good either
my theory is after a few hundred miles and she is good to go ride her hard but not too hard. it's ok to go WOT just no big long burnouts and stupid stuff on a fresh car. what happens in theory is the motor tightens up because of more heat it will recieve producing a stronger seal between the rings and cylinder walls which equals a little higher compression and a bit more horsepower.
hope this helps ya Evo and good luck! if it passes them tests you'll have no prob making a few bucks off it and the person your selling to is getting a deal also! plus you know it's in sound operating condition.