[Dave in MN]

Terry,
Quote from your opening post: "It just seemed to get tighter and tighter until it stopped completely and now it is solidly stuck and can't be budged with a 3/4 drive breaker bar with a three foot pipe."
To clarify, the engine was running over the/some past winter and it seized up as it was running. This is the way I read your description. Based on this understanding I continue:
From your description of how the engine locked up, I would bet the rear main bearing shell had too little oil clearance and it overheated and welded itself to the crank journal.
I would take the engine back to Schwalms and have them increase the clearance a couple tenths at the rear main. They are going to want to observe the condition and learn from the failure.

I only rebuild engines with insert bearings. I have about 180 engines out and running well. I had this "lock-up" happen a couple times about 8 years ago when I switched from Babbitt lined bearing shells to bearing grade aluminum lined shells. Luckily, only one customer (for me, not for him) had this happen while the engine was in his car. He had just made a hard 60 mph run against a strong wind for about 30 miles on the highway with about 320 miles on the engine. The rest of the failures were on my engine test stand while connected to the dyno I use to break the engines in. The aluminum lined inserts needed more clearance than the Babbitt lined. I now provide .002" to .0022" clearance and have not had any issues with seizing or leaks. The bearing insert manufacturer suggested .00175" clearance and when I used this spec, the bearing would occasionally seize when under heavy load. After experiencing the failure, I actually completed a round of tests on a test engine to determine the clearance needed. I actually tried to make it seize under heavy dyno load and was successful several times at .00175" clearance. Methods of measuring clearance may vary from one assembler to another and I believe the way I measure clearance (with plastigage) may not be the same as the supplier of these bearings as I know they use a dial bore gauge. I may have not had .00175" clearance but thought I did. Regardless, I needed to increase the clearance.
Each shop needs to develop and prove their assembly methods. Since your engine was not likely run under load, I can see how it may go undetected by the engine builder. By taking the engine back to them, you are actually helping them improve their product. I would without hesitation, take an engine back like this and want to make the repairs. I would not want it taken apart by the owner as much of the opportunity to learn from the failure would be diminished.

To fine tune the clearance adjustment, I fabricated a fixture to hold the bearing shells in the "crushed" or compressed state and hone the aluminum bearing surface with my Sunnen Precision hone. The stones are a specific compound and grit, purchased after consulting with my Sunnen area rep, to correctly hone the aluminum material.
Over time, I have worked with my crankshaft grinder to provide me the proper diameter main journals (near the small size of the manufacturer's spec.) to eliminate the extra honing process but always have the ability to make a minor adjustment if needed. I posted photos of the fixture, made from two rear main caps, to hold the shells for honing a couple years ago. I'll see if I can find them and either link the post or add the photos again.

In the meantime, the repair of this problem is not an expensive fix for the engine shop. I have been able to remove the welded shells with a brass punch and then carefully remove the built-up/melted on aluminum from the journal with acid. In only two cases did the crankshaft need to be re-ground.

I suggest: Put the pan back on loosely and remove the engine from your car and take it back to Schwalms. Explain exactly how the engine acted as it locked up and suggest to them that it may have been from too little clearance at the rear main. They are good people at that shop. I believe they will treat you right.
Good Day!