With due respect under stress when major system files are being re-written hardware can fail, its has been known. I have many friends who don't have this issue with the iPhone 4s, none so far that have in fact, your situation is unusual that's all, I'm not saying it didn't happen. It is possible for hardware to fail, you do not know positively that its the softwares fault either its just that the coincidence has led you to that belief.
Since Apple examined the phone and said its hardware its hardware that simple. Software does not kill hardware but design though. So that's it I'm afraid. Hardware fails, it could have gone at any time, and the update is good for most phones in all honesty as you only see the minority here out of millions of phones that have issues. Take this unfortunate situation as part of life and move on. Not I know what you want to here, but I doubt there is a 'issue to resolve' and the only one in your case is that you need to replace your phone, as you have been told. Sorry but that's the simple truth, there is no conspiracy here. Hope you get a resolution.