They reasoned that since they could add +3 damage (the other surge ability on the crossbow) to both targets using tetherys heroic feat.
To assist you in further discussions, it is not exactly correct to say you're adding +3 damage to "both targets." What you're actually doing is adding +3 damage to the attack
. Damage dealt by the attack is dealt to all figures affected by that attack.
The net result is the same, but there's a subtle difference in understanding how the rules work. Surge abilities add different effects to the attack itself, which then propagate to any figures affected.
This may be a different situation, Steve-o, but I was looking through the unofficial FAQ, and found an interesting case of a figure being "targeted" twice:
Q: When monster uses skills like Flail, Leap, which target number of heroes, one of which is Knight, can Knight use Defend? What will the effect be? The figure cannot be attacked by the same attack twice, so does it cancel out one of targets?
A: Yes, the Knight may use Defend against attacks that target multiple heroes. This is a fine distinction of nomenclature between "targeting" and "targeted by". Technically, the (let's say merriod) merriod is targeting 2 different heroes, one of which is the Knight. The Knight uses defend to declare himself the target of the other attack as well, so both attacks affect him, and he rolls his defense dice once for each attack.
To me, that says that the knight is essentially being hit by the same attack twice.
Hmm, interesting. I was not previously aware of that FAQ question. I suppose, given this, the OP might consider submitting the question to FFG to get an official answer on whether or not the repeating crossbow can hit a single figure twice in conjunction with skills like Tehtrys's.
Personally, I would be inclined to consider this an effect of Defend rather than an effect of Flail (et al.) That could very well be my own bias talking, though.