First of all, the product being purchased should have been inspected before agreeing on any price, period. If there were any concerns, they should have been brought to the sellers attention at that time. You can only blame yourself for that. So you had to torque a few head bolts and install a new gasket/seal. I'd say you made up for the deal you got in the work you had to do. Big deal. I can bet you checked and rechecked everything you did to it before it went it the truck. So what's the difference?
Bottom line, if this were me selling the motor and the money wasn't there, the motor would have never left. Money talks, bull**** walks. If you don't have the money, don't agree to a price. And, especially, don't give some cry-me-a-f***ing-river story about why you don't have the money. At that point, you're not a serious buyer. The seller really doesn't care.
This Dillard guy must be one hell of a friend for him to let you walk off with a built motor. Then you turn around and sell the truck it went into and put the profits towards a vacation. You must have it rough.