I had a similar experience. I sent my Headset X in twice under warranty for a loose wire in the earpiece. The first time they replaced the straight cord, and the second they found and fixed the problem. Both times were free, and they were very fast. Then, after the warranty period ended, I snagged the cord in the cockpit, and the ensuing yank made them quit working altogether. I called Bose and found out about the $175 fee. I had the same frustration you do, and debated gettting a new headset instead, but finally came to the conclusion that $175 is pretty cheap compared to buying a new headset of any quality... I sent it in, and they essentially refurbished the thing. New ear cushions, new head cushion, and a new cord to fix the problem, all for the $175 flat fee (A new cord is $200). End result, I am a very happy Bose customer.
On a related note, having tried out most of the ANR headsets out there, I've come to the conclusion that the Lightspeed Zulus and the Bose are way out in front of everyone else, and the only two worth having. I tried the Lightspeed "Mickey Mouse ear" monsters (too big), DC X11s (crap), and the Sennheiser model the came out before the S1 (HMEC 460 or something - really terrible).