I am glad to say that my subby is now at the dealership getting ready to be fixed after it sitting in the driveway for about 5 or more weeks collecting spider webs between the tire and body and on the mirrors!
I got an answer from Subaru Canada saying that as an act of good will they are willing to fix the vehicle even if the warranty is over. The deal is that Subaru Canada will pay 1/3 of the total cost of repairs, the dealership 1/3 and I will pay 1/3.
Right now the estimate is $4200 cdn so it will cost me $1650 taxes incl.
They will change the short block and all components inside. The block itself will be a subaru refurbished short block (dealer said it comes from the factory) and all other interior components like pistons, rods, crank, etc will be brand new.
All in all I am greatful that subaru is standing by their product and are continuing to upholding their good customer loyalty to their products as now with the issue resolved I will remain a subaru entheusiast and not turn my back to another subaru and am planning on purchasing the WRX or STi next summer (will wait for the winter to finish as I do not want to buy it right before all the salt hits the roads)!
I will update once I get the legacy gt back next week!
Pat