need help.........

[1994SubaruSVX]

last week my car stopped compiling miles and the speedometer just buried itself. took it to subaru dealer and they said some speed sensor in the tranny needed to be replaced. i bought it and they were to replace it today.

i just got a call and they said that some gear in my tranny was hitting the sensor and knocking out or something. basically i was told that they would have to tear down the tranny and replace some gear to the tune of $1100 parts and labor. these assholes are charging me $89 an hour.

please give me some insight on what i should do or ask so that i can cover myself here. something just doesnt sound right. i am also a little confused about what is really wrong/what they are repairing.

the saga continues.........