IBook Problem, Advice Wanted

My sister has a 1.5 year old iBook G4 we bought with an AppleCare warranty from the Apple Store at Easton last summer. Recently, her hard drive has had problems. We called the 1-800 number, and they sent us back to the store. At the store they diagnosed the problem as a bad hard drive, and told us it'd be 8 days to fix (and free - since it is under warranty). They asked my sister if she needed any files, and they opened her hard drive and helped her access her old files.
Today I get a call from the same Apple store telling me that her warranty is void, that the $300 repairs would now be $700 and that they can't get the data off her hard drive. They said she spilled something on it. She refutes this all.
I find it extremely suspicious that Apple suddenly "can't get the data" she had on her hard drive when they were able to do that on Saturday. Also, it seems very odd that the repairs have gone up about $400 overnight.
I've been an Apple user for six years now - and I've never had an ounce of trouble. I even made sure that when my parents bought my sister her computer for college that it was an Apple.
The problem is - I don't really believe Apple on this one. My mother, father, and sister's boyfriend were all with my sister when they opened the files on her hard drive. And my sister is in tears because I yelled at her for spilling something on her iBook that she swears she never did.
Have any of the rest of you had problems with Apple when you were using your AppleCare warranty?

Eric,
I recommend heading back to the store with all the paperwork you have:
1.) the sheet indicating she didn't spill on the iBook
2.) proof that you have purchased AppleCare
3.) a receipt for the cost of repairs (if you have one)
Be polite, but forceful. You'll get results

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