They want you to authorize the teardown cost up front, just in case the service contract company doesn't pay for the repair for some reason. If they don't cover the repair for whatever reason then you'll have to pay for it. If they do cover the repair all you would have to pay is your contract deductible, $50, $100, whatever it is. you wouldn't have to pay the $600.
Its hard to say whether they'll cover it or not. After its taken apart and they find the problem they have to call the company. The company will send out an adjuster to look at the heads and the rest of the vehicle. They'll take pictures of everything. The body, interior, engine oil, odometer, etc. They want to prove whether you take care of the vehicle or not. The adjuster will give the company his findings and they'll decide whether or not to cover it. Its pretty rare that they won't cover something. If they don't cover part of the repair its normally tax and fluids that you would be responsible for.
There are many causes for a misfire. Spark plugs, coils, injectors, fuel quality, carbon, valves that don't seal, etc. I would think that if the dealer is ready to pull the heads that they've already been over the rest of the things and have narrowed it down to this. They may have done a pressure test or block test already that has proved the engine has a leak from a cylinder to the cooling system, and they just need to pull the heads to find out exactly where the problem is.