They cant make you get your car repaired at an RACV repairer if its not your insurance policy.
You didnt sign a contract with them. They owe you damages, they need to pay you or your repairer for the damages and you can do whatever you like, wherever you like. If they ask for a comparison quote from an RACV approved place thats fine, if you want to be accommodating go and get one, but you dont have to get it fixed there, thats ridiculous.
If you don't get anywhere on the phone, either hang up and ring back so you speak to someone else, or ask to speak to a manager.
Anyway I got rear ended once but it wasnt much damage.. $300ish.. I was insured with RACV at the time and so was the guy at fault.. an RACV approved repairer did the quote and they told me if I didn't want to get it fixed, I didnt have to. They sent the repairer the cheque and he signed it over to me... SWEET!! - $300
First car - carefactor = zero lol.
Legal aid is only for people who are unemployed or on a low income.. it's income tested blah blah, so yeah fat lot of help there