It's seems like you've been very open and honest about what happened, and I believe it's in everyone's best interests to be public and about exceptionally good and exceptionally bad experiences. People may not realize that you really did go out of your way to promote her business - I remember looking at your albums, and every picture said, "outfit by Sapphire's Closet". And I checked out her site because of that. Not many boy clothes, so I didn't buy, but you're right that a lot of dogs want to look like Missy.
It did occur to me that the seller could simply have changed her return policy, rather than writing an inflammatory email. Have you spoken to her since this happened? I would just be sad if I met someone's grandchildren and I cared enough about someone's business to promote it so heavily - it's a shame to me that it ended so abruptly. Maybe chalk the email up to temporary insanity!
Anyway, you did nothing wrong, and as you said. The End!