Possible outcomes

It all started with us getting a notice saying the 2AZ engine in our 2008 tc had been part of a possible oil consumption problem and that we could take it to the dealership and they would see if the engine consumed oil. I had noticed I kept having to put oil in the engine after only a month or so after changing the oil so we weren't really suprised when the tc failed the oil consumption test. The notice covered only the Pistons and piston rings but the mechanic discovered the rear oil plug seeping and it was suggested to be replaced (the bottom part of the engine was replaced and covered by scion) since the bottom was replaced it was suggested that the top be sent out. So we had the cylinder head sent out to a shop the dealership had on file and that shop resurfaced the head and a valve job (I think). We also replaced the chains, guides, sprockets, vvti gear plus others inside. We paid for those. We had the car for 1270 miles & only a month after all the work was done. We were driving and all of a sudden the oil lamp flickered on and then stayed on and the engine sounded weird. We pulled over and as I slowed down the check engine light came on. Originally I had synthetic pennzoil 5w30 but after the work was done the mechanic suggested I hold off on putting synthetic until after 1500 miles and suggested I just use the conventional 5w20 and filter scion had covered under the oil consumption repairs. We ended up hearing the weird noise coming from inside the engine and the oil lamp was off but the check engine light remained on. When I looked it up, I found an engine knock video which sounded close to the sound we were hearing coming from inside the engine. I didn't see an oil leak under the car or oil coming out of the valve cover or by the head gasket. We took it to the dealer again and explained what happened. They had to have an inspector from Toyota come out and inspect it and make a suggestion. The service representative says she was told it was a pin in the camshaft. She said it wasn't something they touched nor was it something me or my wife did. So my question is. Did they mess up? Are they lying? How could have this happened? What could be the possible outcomes? How much of the inside of the engine could be damaged? I don't have all the details yet from the dealership. We've had this car for a few years and had no problems like this before. Thank you.