First let me say that I'm truly sorry that domthewop and others have had a bad experience with this purchase (and I'm REALLY sorry I did not manage to make a deal woth domthewop before he left to dispose of his Xoom). Before I read in this discussion forum that Woot was aware of the demo unit issue and might do something I was able, after about 30 minutes on the phone to Motorola, to open a case with Moto support and get a return authorization, shipping label, and box. The materials arrived on Friday, July 23. By then I had found out that Woot was probably going to do something about the demo units. I opted to wait, besides, it was not really convenient for me to send it back over the weekend. By the following Tuesday I received word that Woot was going to replace the demo units. I decided to accept the Woot solution, mainly because I could continue to play with the demo until the new one arrived. I received the replacement unit last Thursday. It appears to be good and it updated to 3.2 within the first 30 minutes of being online. Other than the time it took for them to work out the details I would say that Woot took care of me pretty well. I'm happy with what I got. It took a little patience on my part but it paid off.
If you received a demo unit (Settings -> About Phone, look for the word "demo" in the build number) and have not done anything about it, you need to fire off an email to email@example.com and include the serial number that is under the SD card slot.
If you received a unit that was defective in some other way (not including the demo software issue), the ad plainly said the unit had a 1 year warranty from Motorola. The demo unit issue raised a lot of attention around this sale but the reality is that it did not change the deal for those that got a broken unit. Every electronic device has a certain percentage of failure. Your recourse was to contact Motorola. That was what you signed up for when you bought the Xoom in the first place. It's not Woot's fault if you chose not to pursue that course of action or if somehow you feel Motorola stiffed you on the warranty (I'm not saying that anyone has blamed Woot, I'm just sayin'). Woot even went above and beyond by allowing ANYONE to refuse shipment, something they were not obligated to do.
I doubt that Motorola, as a company, stiffed anyone on purpose. It's much more likely that you got a somewhat incompetent Motorola rep that did not handle your situation as well as they should have, although I will admit that the outcome is about the same either way. I have dealt with Motorola a lot in my job and there are (unfortunately) a fair number of incompetent people working there. If you have a defective unit, my advice is to keep after Motorola until you get satisfaction, because it is my personal experience that it is possible to get satisfaction from them, even though for some it might be more painful than others.
I hope this does not rub anyone the wrong way. I just wanted to try to relate my experience and hopefully steer some people in the right direction. I hope everyone (who still has their Xooms, at least) ends up with a good, working tablet. My wife really likes her's and she is really enjoying it.