For a tech-savvy answer, I feel it depends somewhat on priorities...
If the information on your hard-drive is more important than the DVD-burner working, then a re-format is out of the question. Were you explicit enough with them in this regard? I do not know, I was not there to hear how you phrased this point to them, thou I did hear you at least gave a hint that it WAS important, this information.
If the DVD-burner working is the most important factor, perhaps a re-format is to us a bit of overkill but for a technician it is also usually the fast way out. I am not saying that technicians are looking for an easy buck, but what I am saying is the fast way out is cheapest for them, and thus for you.
I've ran my HDD without a re-format for close to 3 years now.
But, this causes problems... I recently did a re-structuring of the system files (not intentional at first) and have lost all favorites, all settings, all passwords/usernames/etc... In addition, I have no CD-Rom burning ability, the file-search function doesn't work (it does but you have to do it from the commandline) and the list goes on... Thou I did manage to get the 'Help and Support' section working again AND considering my pc wouldn't work at all 24 hours ago, I am content because other than missing some shortcuts and having to re-load and re-do a lot of stuff, all my files are still intact.
So, we compromise. We trade 'all our information intact' for functionality, or the loss of it. Thus, the most functional pc is one with nothing on it.
Is it because of spyware?
I've been on the technicians side thus far, knowing from experience because I operate a small service company myself that easy-way-out = cheapest price. But this bit would've pissed me off, I don't like somebody feeding me a bunch of bull, he could've just said it was the easy thing to do.
Far as it still not working... Now you are at the point where you got nothing left to lose... Should you take it back and let them know that, since they lost your information despite the fact it it still not working, they at least could've got it running? Yeah, I think I would, let them sweat it and call them and bother them a bit (but not too much) and maybe it will work.
Keep in mind my cd-rw doesn't work, I think it has something to do with XP myself.