Not sure what your original engineer was thinking but they sound like they were working in a box--trying to patch something that should be rebuilt for the sake of ecomomics. My wife (structural engineer) took a look at your post and indicated that a good engineer with the proper resources at hand (such as a construction company under the duress of a persistent lawyer) should be able to facilitate the correction of your problem in no time. The beam may or may not need to come out, but this is not for you to worry about. Get an attorney to make it his problem.
cj