Don't give up!! I have had some problems with contractors, etc. - nobody blinks an eyelid till you convey a CREDIBLE threat to take them to court, and then they completely change their tone!! Of course, you should be WILLING to take that step if necessary - have you tried the better business bureau? They do arbitration and stuff - going by your case, most probably any arbitrator would decide in your favor, in which case they weaken their future options tremendously.
good luck, and keep us posted.