Repair option after read error failure

Using Data Lifeguard Diagnostics for DOS, I get read failure on the short self test, after which I am asked if I would like to repair the drive.  I was just wondering what exactly occurs during this repair process.  Is it simply a re-mapping of the data away from the damaged areas?  I notice after a repair is performed, the drive will then pass the self tests and there is no indication that there was ever a problem.  

Data Lifeguard Diagnostics will try to reallocate the bad sector if you click on the repair option. 

So, a read error is fairly significant, and usually indicative of a failing drive.  After the repair option is used, and the bad sector(s) are reallocated, why does the SMART data not reflect this?  The drive in question now shows completely clean SMART data after the repair process (0 reallocated sectors, 0 reallocation events, etc).  In other words, the drive now appears healthy, but I know it is not.  The only indication of a problem requires an inspection of the self test logs.  Yet, the drive now passes both self tests without issue.  

Also, if I decide to implement the repair option on a drive that is currently covered under warranty, will that drive still be eligible for RMA afterwards?