Thanks for all the feedback.
For me it's simple: I paid them to do a job and entrusted my goods to them, they lost it - admitted they lost it and then requested (by email) that I submit a claim form. I've shipped quite a few pcs of gear with my local Fedex store and they're helpful and friendly. I've put Fedex on 10 days notice that I'm going to seek compensation through the legal system if they don't compensate me in full - this is a requirement that the court system in Pennsylvania has, I've used the local magistrate courts before and familiar with the process. They get a copy of the claim and either have to pay the claim (and court cost) in full or appear in court. As I handed the goods, and payment, to my local office they will be on the documents as defendants. I have updated the local office, they're as surprised as I am that they haven't paid up, and have ordered to get involved - I'll take up their offer, if they can help get the compensation without going down the legal path then so much the better, if they're unsuccessful then at least I've behaved in good faith.
I valued the items based on their Audiogon recent used sale price, but will use the higher new purchase price on the claim - if I get a sympathetic judge (David vs Goliath) he might be supportive?
I believe they're trying to bully me into backing down, and they've gone to excuse #2 as suggested!
Fedex, UPS and USPS handle millions of packages and lose and damage goods - it doesn't matter who you use they're going to generate losses for customers, it's how they handle this that counts...