By way of follow up, I finally got this problem fixed today. After a month of back and forth with a very recalcitrant bike shop owner, I convinced the guy to try out a new freewheel. Presto -- no more clicking on the 3rd and 4th cog.
It's pretty frustrating that it took my almost a month and four visits to the shop to get some satisfaction. They guy basically refused to accept that there was a noise and couldn't be bothered riding it to hear it for himself. If it didn't make the noise on the stand, then it didn't exist.
While I was persuading him to change the freewheel, I tried to understand his situation. Didn't the manufacturer (Norco) pick up the liability for return and defective parts? Apparently, not he claimed. If he returned it to them and they determined it was fine, then he was on the hook for it. Hard to believe somehow. Anyway, it wasn't fine so presumably he will be credited for it.
I'm looking forward to next year when MEC starts to sell bikes up here in Canada. They're a reliable outdoor store with a no hassle return policy. Sort of like Walmart but will good quality stuff.
Small time bike shops really need to review the way they do business.