i work at best buy, so i may be able to shed some light.
for the service plan, which probably cost you between $200 and $300, we promise to replace your tv with the most comparable model we have. with high technology like flat pannel televisions and computers, the most comparable model a couple years down the line is most likely going to vary in price a LOT, but we can't tell how much that will be when we sell you the tv, and it would be a terrible business decision to basically give you a refund - the tv you get for that would not be at all comparable to the one we promised to replace with a comparable model. if we did that, every single person would buy the service plan, wait two years, break their tv, and then take us to the cleaners for a tv twice as nice as the one they originally bought for free. as tv prices go down, our profit margins go down drastically, and doing that would basically put us out of business.
also, our insurance company, not the retailers themselves, set the terms of the service plans. it is TOTALLY standard in things like homeowners insurance to replace damaged belongings (like a tv struck by lightening) with product of a comparable value - NOT the original retail value. there's not an insurance company in the world that will provide for that, and the service plan that you bought is basically an insurance policy. you're getting fair market value for your defective tv, which is what every insurance policy you'll ever read guarantees, whether it's a service plan or regular insurance from a company like State Farm.
on the other hand, i work mostly in our appliance department. because appliances don't rapidly depreciate in value like tvs and computers, we give original purchase price when a service plan return is authorized. if you bought a washer for $999 three years ago, you'll get $999 to pick out any new one you want today.
in each case, we're doing what's logical, please try to see it from that perspective. you're getting a new tv for basically whatever you paid for the service plan instead of having to shell out well over a grand in order to get a comparable replacement. if you'd like to upgrade, you can use your $1300 towards a nicer tv, i'm sure. we're giving you exactly what we promised you, but the price of a comparable tv has changed, which is something that we as a retailer have absolutely NO control over. so, if the service plan cost $300, you're essentially saving $1000 off of a new tv, and had you not bought the service plan, the manufacturer would have told you that you were basically SOL.
if you're getting a tv that's the same size and the same technology (actually, it's probably better technology since the components that tvs are made with have increased in quality in the past few years)...then what's the problem?
Maybe you could take the matter to someone higher up on the ladder? What good is a warranty if they're going to go and do this?
that's a lot for a service plan. where did you buy the tv?