Okay, so I am interested to know why you didn't accept their offer to build you a new like for like watch, I mean surely that's a win win, you get exactly the same watch back but brand new and presumably with a two year warranty.
My wife isn't a lawyer, but she is OBSESSED with consumer rights and she said TAG's obligation is to restore you to your original position - the offer of the same watch seems to meet that brief, even though you didn't choose it I reckon a court would agree that was as much as could be expected.
But of course this is just an opinion. Not facts.
As an aside, I was just thinking, what if you had bought a Rolex on the grey market for double its RRP and the same thing happened. I can't see Rolex re-imbursing double the value, can you?