Oh Rachel, I am soooo sorry you are having this trouble. I feel so upset for you that you'd think it was me. I know how I would feel if I had invested so much in a machine only to be in tears over it's inability to perform the way it is supposed to.
I am sooooo glad your hubby stood up for you! AND the one gain, was that the lady at the store got the same result in just a few seconds. As you had already worked out, the BSR is sending the needle up and down properly, therefore you would think that the problem would be the machine itself. But since she put your BSR on one of their machines and it did the same thing, then it has to be something with that BSR. I would think if the BSR caused their machine to malfunction, that if they gave you a different BSR to try on your machine and it worked fine, then that would prove that it is the BSR.
Either way, you are still left with a very expensive machine that you can't use all of it's functions. I can totally understand your frustration....in fact, I think you are handling it admirably, I probably would have blown a gasket and embarrassed myself.
Just remember, if the dealer doesn't give you a satisfactory solution on Thursday ( or you DH) then try contacting Bernina USA directly. They usually respond with 48 hours.
Good luck.