I am not sure if they have gone downhill. I visited one for the first time in the fall, I was not impressed by the quality of the equipment and components they sell in the electronics store, it is mostly the type of low end gear you find on eBay, except at a higher price. I walked out empty handed after spending two hours to get there and back.
It would have been incongruous with the Keysight image, so I am not surprised if Keysight dropped them. I hope if you take it back to Fry's, they will do the right thing to get it repaired for you. My guess is they were no longer an authorized Keysight dealer by the time they sold you the DMM, that's why it was never registered with Keysight as a purchase.
And yes, Keysight repair outside of warranty is not cheap. The repair workmanship is top notch, and you are paying for it.
Update: Just read Muttley Snickers post, it is worth a try. Amazingly, Fry's is still selling some low end Keysight gears. The DSOX2012A is on clearance for $954, almost half off its regular price.