I am waiting for a replacement 16GB at the moment. When I contacted the customer services for Google Play they told me I would receive an email from their returns department with an address/label I would need to send my N7 to. Was that not the case when you contacted them?
I am still waiting for said email at the moment (and notification that my replacement has been sent out which was supposed to be included in the same email) so I cant be certain that this is actually the case, but I definitely wasn't told to hand over the device to a courier.
Out of interest, how long after you contacted Google did you have to wait for notification of your replacement and/ or its delivery? I contacted Google on Sunday (5 days ago) and apart from the initial confirmation email I haven't heard a peep.