Your situation is identical to mine. I too was really happy with my Surface 4, it was everything I wanted and was still absolutely adequate for my needs, however, to be offered a replacement for $400 to fix an outdated machine suffering from a design defect was to say the least insulting.
Obviously that would have been throwing good money after bad as there would be no guarantees that it would not happen again, so I bit the bullet and went to Dell, I got an XPS13 for a very reasonable price, it is a bit heavier than a Surface but is absolutely great and fits my needs perfectly. My only negative comment is its webcam leaves a lot to be desired when compared to the Surface but that is far outweighed by knowing that should if ever need a battery replacement it is a pretty simple operation.
I'm afraid my days with Microsoft are done, and like you I will advise anyone who wants to listen to steer clear of Microsoft hardware because once you've bought it and the warranty runs out you are on your own. A very sad situation that this callous attitude should come from the company who started it all. How low they have sunk!