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Since you didn't get the title almost immediately I imagine the dealers bought the car on credit. When they sell the vehicle, they pay off the car with the interest accrued, the loan company releases the title and you pick it up. In the two instances I've dealt with dealers who do this, one had the title with in days, the other pushed it to the 30 day max. A carfax would have shown if there was a lien reported without a payoff, which I imagine you ran in the first place.
My guess is the jaded salesman made a huge mess of things paperwork wise, or perhaps kited off with the dealer's money. They initially tried to make things right, but now they are in full damage control.
I agree with other folks sentiments about getting a lawyer. I'm sure everything will get sorted out; it will just be a PITA (as if its not already).
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