Word of advise, don't ever even think of going into business for yourself because you'll wind up broke.
You're not shelling out $350, it's put on hold just in case you don't return the defective device and decide to "keep" the new device. It's insurance on Google's end so they don't wind up getting ripped off by the customer. Unlike you, not many are on the "honor system." I'm sure they explained this to you when you made your return so it should not come as a surprise to you.
Although I agree with some of what you said, there's no NEED to put a full AUTH on people's cards. They have all your info already. Everything including your card number (s). So it's not NECESSARY to bug people for on the spot AUTHs.
As long as Google alerts you, in writing as well, that if you don't return the defective one in 21 days then you will be charged and you agree, that's more than enough to ship the replacement out without ticking people's card for $299-349.
Tons of other companies deal with RMAs and don't tick your card with AUTHs. Let's use a direct competitor with the same products: Amazon with their Kindles including Kindle Fires:
They do NOT put AUTHs on your card when you do an Advanced Warranty Replacement! They ship the replacement out without asking you for any money or AUTH! They DO let you know that if you don't return the defective one, you will be charged in full. Guess what? Amazon isn't getting scammed with people keeping the devices! And nor would Google!
Google needs to do away with this unnecessary and disruptive practice. Don't treat your already paid customers like criminals looking to run off with a defective device when you already have all their information to charge then God forbid one out of a million does.
Sent from my Nexus 7