Uh no. If the warranty is 5 years, I expect it to last at least that long, if not longer. If the drive fails within 5 years, I expect a new drive since I purchased a guarantee of uninterrupted operation for 5 years. If I didn't get it with the first drive, or the second, or the third, then I expect them to keep sending me drives until they get it right or refund my money. If they go out of business doing this with too many customers too much of the time, then they should have as their products suck. That is how you honor warranties the right way. Of course, companies cheap out on them now, and it's getting real bad with things like computer components, notably, motherboards, video boards, and hard disks. A new product was paid for, and it was faulty, and they send a refurb? I did not buy a refurb!
A five year warranty is not a guarantee of five years of uninterrupted operation, only that they'll fix any problems you have with it the next five years. Otherwise I bet you'd see a lot of "accidents" around the four year, eleven months mark. And while it might have been a new drive when you bought it, if you need a warranty repair after four years and eleven months it's now a four years and eleven months old drive. Do you think your car insurance company should give you a totally new car when your 20 year old car is totaled by a drunk driver? Same with warranties, they are only intended to reinstate you to where you are now, not where you were almost five years ago.
Yes, the refurb should absolutely be tested and working. If it has any metric of how "worn" it is, it should be no worse than what you sent in. But I think you have an exaggerated view of what a warranty could and should do. Particularly if you apply it to the product as a whole, if your laptop broke you should get a new one? They can't just swap the faulty RAM stick for a new one and ship the rest back to you? I mean your operation of the laptop was interrupted right, try again? And while computer equipment tend to fail catastrophically it'd be even sillier to apply this to consumer goods as a whole. I find it quite okay that their choices are:
1) Repair - if you want to swap a broken component, fine no matter if it's one capacitor or one motherboard.
2) Replace - that's how I have a WD SSD in my machine though I bought a OCZ SSD
3) Refund - if all else fails, hand the money back. But not just because you'd like to see the sale "undone".
I feel we here in Norway have very strong consumer protections in law, but still nothing like you imagine them to be. And I don't think it would be very healthy for the market if they were.