Thanks. ya, very poor judgement on my part. I assumed since he was a racing buddy, my wife has been friends with his fiance for many years and she even hooked them up, and that he is related to family, that he could be trusted.... apparently not!
On a side note, I posted the above on the local dirt forum as a buyer/seller beware. Copied and pasted exactly what is above from the dirt forum to this site. His fiance emailed my wife this morning and said she was contacting her attorney and filing a slander suite!

They can't afford $500 that they owe towards this motor but they can afford an attorney for slander?