The work they have done up to this point was to install the chips with their stage 2 tune, remove those chips and re-install the chips that contain the stock (but updated by MBZ for idle issue) programming that I originally had when I purchased the car. So they've done some work, yes.
The owner, Jennifer Bentson, stated the following:
We returned your ECU to original software version as requested and will send
it out as soon as we received payment for US$ 375.00 in form of postal money
order or cash or WesternUnion.com.
So, just to recap:
You sent them your ECU which they modified and you paid them for that. The price was $325.
They sent you the modified ECU which failed to perform to your satisfaction (regardless of whose fault said failure was).
You filed a claim with Paypal, and the claim was successful. Thus, your cost up to that point was now 0.
You then came to an understanding that you would send them the ECU again, so they could return it to "original condition", a job that I would imagine is similar to what they did the first time and for which their price is $325 which you at the time found reasonable.
They have now done the job twice and have received no money from you and for doing the job twice they're requesting only a $50 surcharge rather than try to charge twice for two jobs. I imagine they don't trust you to use Paypal since you've already filed a successful claim against them there once and possibly even told them that you retained counsel.
I find it odd that a lawyer "advised" you to go on the internet with your story (for which move he gets nothing) rather than use some more direct approach, but, that aside, you have what seems to me two separate, but linked issues:
1. What is their warranty, more specifically, is there a warranty as to usability? That is to say, did they represent that their modification was guaranteed to perform a certain way without any side effects or did they only guarantee their materials/workmanship (as most electronics manufacturers tend to do)?
2. What are the laws of your state with regards to usability, that is to say, does your state require a separate usability warranty or is it considered implied?
As of now, we have a shop that has done what they said they would do twice, but has received no money for it. This is bad.
You have no ECU. This is bad.
Your car doesn't run. This is bad.
In other words, we have a lose-lose situation. I suspect, the easiest thing to do here might be to work with them on the amount and come to some sort of a mutually acceptable solution where both their work and your inconvenience are recognized, especially if you don't have that usability angle in your state and/or they made no such warranty. A court action is both not free and time-consuming, meanwhile your car is still immobile.