That $700 price to replace the DSP (AM100 or AM200) with the AM250 on your T775 is the current price of the upgrade that gets you Atmos outputs, and it's something most of us could handle ourselves with a small crosspoint screwdriver, a PC and a USB-to-9-pin serial cable. If your servicing dealer is indeed putting in an AM250 for that cost, they're not charging for installation and it's a good deal. If it's just a replacement AM200, that's a waste.
You don't get a new warranty on the whole AVR if you upgrade the DSP, just the AM250 is covered. However, if you later add the VM300 video board you'll essentially have a new T777v3 with BlueOS, Bluetooth, Wireless, and Dirac Live!
On my T758 I had taken advantage of the $200 upgrade option for the original VM120 to the VM130 and they threw in the BlueOS module. Shortly after that upgrade the original DSP unit (AM100) failed. I got a used AM100 from my dealer, it was one out of a T765 that another customer had upgraded to AM200 or AM250. I couldn't afford the $630 for the AM230 at the time, so $50 for a used AM100 was ideal. You might be able to find a used one as well and save some money if you're not needing to go Atmos right now.