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Hi all. If anyone out there has been aching for closure, here you go:
The legal advice I sought had a great belly laugh after reading the letters and hearing my story. Although I did receive a fourth and final letter from my neighbour, cranking her required expenses up to an even $1100 and again threatening legal action, I decided to let the neighbour take the initiative and let things be. We received some dirty looks for a few weeks but no further letters.
After a while the neighbour started returning our friendly hellos as we passed in the hall and it seems they have since buried, or at least misplaced the hatchet.
They have since sold their unit and are moving out later this month.
And so ends the crazy neighbour varnish saga!