Yup.... I'd be in jail. Friend's shop or not, I'd stop talking to them at ALL, come in with a lawyer, and demand either your bike, fixed, if anything, for the cost of the repair you agreed to, OR the entire purchase price of the bike. Hands down, they owe you one or the other, no matter what it costs THEM.
Having read through this whole thread, I also have to say... in my book, no matter what your opinion, anyone who calls another bro's bike a "piece of S__T" is an absolute turd. Looks like it was, and could be again, minus the help of the jokers "working" on it. (I've got a 30 year old Honda 400... is it a piece of _____ just because it's old and used?) That nonsense is right up there with the "I'm a biker and you're not" crap. Not everyone can afford new stuff, and, like me, not everyone WANTS new stuff.