Hi,
I've been following this thread with interest and am sorry to hear about your bad experience.
One thing I've not seen anyone mention is the fact that you live in California (me too).
California has pretty strict auto repair laws effecting estimates, additional charges after the estimate and detailed expense reports, among other things. Most shops require a signature approving any increase over the original estimate, but I don't really know if that's a legal requirement or simply good business practice to protect themselves.
I did notice in your original post that you waited a year and a half for the shop to get back to you with the current cost total. I wonder how much was being done on the car during that time, with you in the dark as to the increased cost?
My point is that you might be well advised to talk to your local district attorney's consumer affairs office. They can tell you more about the law and how it applies to your situation. Other suggestions to hire your own legal counsel are a good idea, too. Even one or two or three hours consulting fees might be a good investment right now.
Personally, I would not allow the shop to do any more work or rack up any additional cost until something is resolved. Even then, after a dispute I probably would not want to trust the shop to any additional work on the car. You have noted one error they made, and it might be wise to have another, knowledgeable shop looking at the car in much greater detail to see if further, hidden mistakes or problems exist.
If you can prove the original shop made an error, the cost of making it right at another shop might be recoverable from the original shop, possibly in small claims court.
Overall, it's an unfortunate situation. Mostly, I think you need to take control of it and do some serious research as to what resources you have available and what the laws are governing this transaction.
I ain't no lawyer, but personally I would not sign anything or make any agreements with this shop, or allow them to do any more work, until I had legal advice from an attorney and have talked to the DA's consumer affairs division. Then, after everything is hashed out, any and all further agreements with this shop or any other should be in writing, completely detailed, with a signature required before work can proceed.
Keep us posted!
Alan