Hi, I used to work for Toshiba in the UK, so whilst I cannot be sure on the guidelines within the US, I agree with the OP in this situation.
You got a disc with the machine, i'm assuming this disc will have a code on the top (if I remember correctly a GMR code) that proves it is the right disc for the right machine. This code doesn't ACTUALLY prove what place/date it was bought, rather that it is destined for a certain model.
If this disc cannot be read than you cannot complete a product recovery on the machine to reinstall the software. Now whilst Toshiba's proposed solution isn't a whole lot of money, it is still a manufacturers defect that has caused this problem. Yes, CD/DVD's do occasionally have such problems, but if the computer company decide to distribute the software in such a way, they should be prepared for this.
What I would suggest is to see if the disc can be tested by Toshiba themselves, and if they find the disc cannot be booted from, this should show that they need to replace it.
In the UK these discs however are not even provided. Customers are to create their own, and if the fail to do so, they must buy discs, because the machine forewarns of this when first booted. However the practice I have described above happens in the UK if the customer has purchased a disc, and that disc fails.
Although to add a final twist, this takes a few weeks to complete, and $25 versus a few weeks may prove to be the more attractive option.
Please however take this with a pinch of salt as I cannot speak for Toshiba of USA.