If the ammo is at fault (and if it wasn't the gun, it WAS the ammo)....then your gripe is with Federal, not S&W. They did offer a replacement, at cost. I think that is more than fair.
As for S&W not taking up the matter with Federal, on your behalf,....why would they ? You bought a gun from them (indirectly)....you didn't retain them for legal services, after all. More importantly, why in the world would you expect them to ? It's not their problem and you shouldn't expect them to take it on. What you need to do is contact Federal, supply them with all the evidence you have....and insist that they make it right. You may not get anywhere, but THAT is where you need to direct your efforts....and your ire.