My gut reaction is that an SL600 represents major dollars to these folks. They probably figure, "what's $5,000 to a guy who (as far as they are concerned) paid $150,000 plus for his car?"
My experiences with my car since I bought it a few years ago have made me quite cynical and suspicious of some mechanics, especially those at dealers, who are too quick to fix what is not broken, or feel that they can hoodwink me because I do not have vast knowledge of my car. (My over-abundance of common sense, however, compensates for any deficit.)
My opinion is that they are trying to screw you. Honestly, how does a torque converter, which is about as complex as an electric fan, fail? And I am sure that the tranny in your dad's SL600 is a lot tougher that the one in my 260E, yet I drove for several weeks with the fluid half-empty without any failures. (At least none that I know of!!)
I agree with the person who suggested some legal counsel. Perhaps a phone call from a lawyer or some other authority will get some results. I had a steering problem when I bought my car and the dealer blew me off, saying it was not their fault and that I would have to pay for any repairs. A few days later a big, shiny Virginia State Police cruiser arrived at the dealership with the trooper responsible for safety inspections in that region inside. Suddenly, the dealer became very motivated to fix the problem (and was cited for selling me a broken car). So don't underestimate how effective such passive-aggressive tactics can be.
Any work the mechanics have done on your dad's tranny carries an implied warranty, whether you received anything in writing or not. The evidence suggests that they goofed something up. Do a bit of research on the condition of the car prior to their service, so that you can pinpoint what, if anything, they may have done wrong. Get some facts on the lifespan and durability of that particular transmission. Then get them to describe in detail, and with full documentation, everything they did to the car over those five weeks. Then compare notes and take any appropriate action.