I'm not a Microsoft employee, but I've been on this thread a while and might be able to give you some insight into what others of us have been experiencing.
1st, Microsoft will not respond. They will not tell (at least not here) what to expect cost wise and if you tweet to them about this or pay to talk to a tech (you need to pay) they'll tell you the price which is somewhere between 450 and 500 I believe. Most of us naturally find this price point obscene and unacceptable.
2nd, this problem is most likely software related (That is to say I cannot speak directly to your issue, but for most of us this will have been software related) and that Microsoft is in fact responsible for causing it. They will not outright say this to you, but if you look at the history of the little bits they have said I believe they just about admit to this.
3rd, sending this into Microsoft just gets you a refurb sent back with an additional one month warranty. Part of why those of us experiencing this issue find that unacceptable beyond the price simply being too high is the fact we have no faith that the unit we would receive would not simply put us in the same situation two months later. Microsoft's handling of this problem has given us zero assurance to the contrary.
The question of if this is legal or not has been tossed around by several of us, but I do not know that anyone has taken the step toward actually attempting to sue Microsoft yet. I know I would be happy to join a class action lawsuit at this time.
Hope this helps