Rachel, I'm sorry that you've had this experience. I've had some of my stuff look like that as I was/am learning how to use my embroidery machine. Luckily though, I did it on my "test" pieces, not my real thing. I understand that you don't want to take it back to the shop...so here is what I've learned from my learning experiences. With those kind of puckers..stippling will not help it unless you do lots of tiny micro stippling and lots of it. If it were mine...I would absolutely have that part redone either embroidered again or done with appliqued letters, then applique the replacement over the existing piece and then cut the bad piece from the back. Best of luck to you!
You piece is darling...it can be fixed though