A problem with the battery connector terminals

My wife took her iPhone 3 in to our local Apple Store and explained that battery appeared to charge okay, but the phone would not turn on and it became totally unusable.

Typical of Apple secrecy, the technician took the phone behind closed doors and after about five minutes, when he'd obviously opened it up, he came back with a strange explanation. This he explained was because the terminals had turned from white to red? but she doesn't know whether he meant the terminals on the battery or the terminals within the phone itself. He then said that this meant the phone was totally unrepairable.

He then went on to offer her another phone for over a hundred pounds!

I would really like to know what opinion people have about this attitude - or is he just trying to make money for Apple?