Quickly scanning over your letter, seems like you've got the upper hand.
At law, goods and services provided by companies must meet "Conformity with Description" implied terms, i.e they should give you what they represented they would give (clearly they did not) so this may amount to a misrepresentation.
Also, the "Merchantable Quality" and "Fitness for Purpose" implied terms seem to have been breached, basically, a good must be fit for the purpose for which it was bought and safe for the purpose for which it was bought.
In terms of the service, you can sue on the grounds of negligence, based on the fact that the workshop owed you a duty of care and clearly breached it, acting out of your best interests.
Anyways, hope you pin these bastards.
Here are the statuory references to the implied terms in case u were wondering:
Conformity with description, s70 TPA; s32H FTA
Fitness for purpose, s71(2) TPA; s32IA FTA
Merchantable quality, S71(1) TPA; s32I FTA
Also, forgot to mention sale by sample, if they actually SHOWED you a suspension setup prior to your purchasing it, then they still chose to fit the wrong suspension, then sale by sample provision may be breached.
s72 TPA; s32HA FTA
If you need any extra info just let me know.
Ali.