There many unanswered questions here.
First, just because the boat was dirty and the tech's you spoke with seem incompetent, doesn't mean that someone abused your engine enough to cause it to "blow-up". I'm not taking sides, just talking about reality.
Second, milky oil doesn't mean the engine is toast. It needs to be torn down by a professional and see what is really going on inside.
Third, 5 hours for 2 or possibly 3 demos is all that high. It depends where the boat is sun. Is it a 30 min idle to open water? Did the tech let it "warm-up" at the dock or let it run to charge the batteries up a little before the run? did they run it the day before the demo to make sure it was OK? Just a few thoughts..................
Last. If the dealer/broker was not "negligent", he can't be held responsible for a mechanical failure when he was demo'ing the boat. Not opinion - the law.
Get all the facts straight before doing anything. Don't threaten to sue, etc. That is the best way to get someone to shut the door and see how much it costs to actually sue them. Sometimes it's a lose/lose.
Best of luck. My $.02