You have to ask yourself one question. Do I feel lucky? Well, do ya punk?
IMO what this outfit did and said is either ignorance, stupidity, or both. What would make anyone think one of these O (AKA "crush") rings is in like-new condition and reusable after 60K/5 years or more of hot/cold cycles? I've seen the requirement to replace the O ring (even if not replacing the pump), in at least a couple of DIYs, and suspect it's fairly common knowledge for us amatures who spend time researching the job.
But given their un-professional approach to this, you have a very solid counter argument to what they're telling you. I'm assuming they did not give you the 5% talk up-front. So they should have no leg to stand on hitting you with this after-the-fact, without having offered you the option to replace the gasket with an extra charge, prior to beginning the job. However, if they did give you that option up-front, then they probably will be able to wiggle off the hook, and put yet another notch in their stealership belt. Good luck - I hope you wind up getting a N/C out of them on this.