I know this thread is months old now, but I'm curious if it ever came to a satisfactory conclusion. I can understand Sherwood not wanting to have the whole story aired in a public forum, but I hope that the OP finally got some satisfaction.
Sherwood did indeed answer all my questions regarding what to expect from one of their dealers. They claim to also have contacted the owner of the LDS, although they would not communicate what the outcome of that was. Underwater Connections has not attempted to contact me since they "asked me to leave" their store. I haven't "begged" to go back to spend my hard earned money and be mistreated. Ironically, they are also the only local dealer for DUI and Whites (fusion) dry suits that I was in the market for. I was planning on buying a suit from them the day I returned the regulators after finding the problem they caused - which I only wanted to bring to their attention since it appeared that they missed something. I think they expected me to sue them or worse, from the over reaction they gave me. Obviously, I didn't buy from them since I was asked to take my business elsewhere.
I didn't expect Sherwood to do as much as they did. They confirmed that the service should have been done per their published manual, and that the parts in question are necessary, and the most likely part to cause the problem I was experiencing, and that the parts were indeed included in the Sherwood parts kit, contrary to what the LDS owner claimed. They also let the LDS owner know they had a complaint.
Now, if anyone asks me about Underwater Connections, I let them know that they have wonderful instructors, but their owner and repair technician or ignorant, arrogant, incompetent, lazy, or all of the above. I suspect that they know how to maintain the equipment in their rental fleet, but caution them not to expect service or repairs will be done correctly.
The regulator in question is toast...it is beyond cost effective repair (I could buy a new one cheaper), but I didn't. The experience soured me. Clearly you don't have to know anything special to claim to work on regulators, and it is basically a self-regulating industry. Though this experience I gained a lot of knowledge on how to service regulators, and how they work - and how to properly follow the manufacturer's service manual. I've since bought all the tools necessary to service the regulators, including a magnehelic which the LDS didn't even own (a $50 item). I don't see myself taking any regulators in for service again. This is not to say that, should they not meet the requirements after service (like in this case) I wouldn't send them in to someone for repair.
Since this occurred, I have paid a lot of attention to how regs perform immediately after service. I venture to guess that upwards of 70% have some sort of malfunction on their first usage after the service. This might be something that could easily be corrected during the dive, or might require return for correction, but that is way, way to high, IMHO, for "critical life support" equipment.
My recommendation would be to make sure the place you take your equipment to be serviced uses that equipment, and therefore services that equipment, on a very regular basis. They are much more likely to know the proper procedure, and to have seen the problem with equipment they work on all the time. In my case, even though they were an Authorized Service Center (which doesn't really mean anything to someone who isn't having warranty work done), they seem to rarely work on Sherwood regulators. In fact, when I took them in the first time, I was told by the owner that Sherwood no longer makes regulators, but buys cheap ones from China. He said they are basically an Industrial Valve company, and I should consider buying a regulator from a company that specializes in scuba equipment. That should have told me something, more than he wanted to make a new equipment sale.