I'm not in any way diminishing the work needed to upgrade S2 guitars. I know it's a lot of time involved, and you should be fully compensated for that. All I'm saying is that if I were ISW, I would do it a little differently. I would not charge my best S2 customers $60 in "pocket change" to allow them to use the upgraded S3 engine with their three S2 purchases while charging other customers only $20 or $40 for their one or two S2 purchases. I would charge a flat fee of, for example, $40 per licensed customer to bring whatever S2 guitars they own over to the new S3 engine.
I understand that way of thinking may be a little confusing, but since we're talking about recouping the cost of labor and not replenishing physical goods, you could set a fixed price for the S2-to-S3 upgrade so that your top S2 customers will not have to pay 2X to 3X more than other S2 customers for the same benefit of using the S3 engine.
That's just my philosophy. But then, I also give my customers 30-days advance notice of upcoming sales, so I'm definitely not your typical developer.