Rachel,
I totally get what you're saying about it not being worth it to try to get a refund...sometimes the stress and aggravation of trying to be assertive to us non-assertive types costs more than letting it go. You still have the problem that you don't have someone else to do the embroidery.
I would take it back to the shop to show them the problem and if it helps you think of the service you're doing to the owner of the business; they don't know they're losing business and getting a bad reputation if they don't have the chance to see it and offer a solution. Whoever did it is probably just hoping it will all go away.
I wouldn't take out the stitches because it will never be the same. I think, close stipling will hide the puckers and make it look like it was supposed to be like that. If not you could replace the banner with the new one the shop does the correct way but love is supposed to build the quilt not aggravation so whatever makes you feel the best is the way to go.