Suspended
So the outcome, he took delivery of a 1,5 triple 2012 model a week or so ago and is over the moon with the result and with treks customer support.
I think this story highlights a few issues really.
Trek are a very good company IMHO. The way they appear to have dealt with this, with the minimum of fuss, is how I'd expect a company to deal with a problem; it's about doing right by the customer.
It's really important to find a good LBS. In this case it's difficult to know why they have underperformed; the store as a whole could be sub-par, the member of staff who dealt with you and your brother could be new and inexperienced, he could have been having a bad day and not giving the problem the time and attention it required, or he could have just been completely incompetent.
Personally, I'd start making some discrete enquiries to identify another LBS locally who are well regarded.
Hope you two enjoy your bikes, and as a Scottish friend of mine says 'Wind at yer back!'