Update - I stopped by the dealer yesterday afternoon and talked to the current acting service manager - their service manager was out of town on training. Told him we were unhappy and felt they should pay for all the repairs.
I asked to see the tensioner so he pulled it, the mounting bracket, and the belt out of a trash can. I confirmed that the tensioner had failed by placing the plunger face down onto a work bench and pushed down on the body of the tensioner. The plunger depressed fully in just a second or two. I found a description last week on the web describing step by step the replacement of a timing belt on an Outback, and that description stated a properly functioning tensioner takes 10-15 minutes to fully depress using body weight. So it does seem more plausible to me now that the tensioner failed. The threads for the tensioner mounting bolt were also worn so that the bolt doesn’t seat securely. The front of the tensioner pully has a sharp ridge worn on it due to rubbing against the front cover while the tensioner was loose. To clarify, the inner 1/4" of the width of the timing belt (the portion closest to the block), not the thickness, had been shreded.
That said, what I’m hearing from others both here in this forum and from mechanics is that the tensioner is commonly replaced when the timing belt is. I asked the acting service manager at Subaru last week if it weren’t common procedure to replace the tensioner at the same time as the timinig belt. He claims not and says he’s replaced maybe three tensioners in his service career, and many more belts. He claims it’s not a common replacement item. Seems to contradict common sense.
The car has been running smoothly and well with no noticable noises until the the tensioner failure. I asked the Toyota dealer to replace the timing belt when we bought the car specifically to avoid the kind of damage which has now occurred (bent valves). They replaced the belt and seals once, then subbed the job to Subaru after we brought it back in because a bad seal was apparantly leaking oil on the belt. I spoke with the Subaru service manager at that time and he assured me that they were the pros and would get it right, and that it wasn’t uncommon for other shops to have problems with timing belt replacements on this particular engine.
The Toyota dealer has been very cooperative in taking care of a lot of service on this car gratis once brought to their attention, includiing a major transmission component, but that’s a whole 'nuther story. When my wife spoke with them yesterday the Toyota service rep said if we talked with their manager he might offer to pay for half of our half of the cost of the head and valve work. The post to this thread by OK4450 indicates that it’s common to replace the water pump at the same time as the timing belt and tensioner. I’m wonderiing now whether we ought to have that done as long as we’re going through this.
The Subaru service manager is supposed to be back in this morning and I’m going there as soon as I finish this post. More later…