If they replaced every part with an OEM one, and the title wasn't branded, I'd do what he did, unless I could find a brand new one for very close to the insurance pay out.
Not too many dealers would turn down a fistful of dollars to get what is in reality a year old bike, off the sales floor. Some would, but the most important word in vehicle buying is "next." I don't get emotionally involved unless it's something that is in obtainable, e.g. a completely original Z1R with low miles, etc.
I would never take a new bike to a track day ffs. Not that I'd crash it, but there are lots of others who have dubious riding skill. YouTube is riddled with track day crash videos. Some almost make me cry.