I've fit 700 c Planet Bike fenders on 27" wheels without problem. You just need to adjust them properly.



EDIT:

I was just thinking aout your other issue. I've worked on many old bikes; threads sieze and bolts snap; especially on old neglected stuff. I don't know the condition of your hub but being a 27" wheel, it may not have been in pristine condition. A bike shop can't take responsability for damages incurred while working on old rusted and sieze parts. Howerver, they need to be upfront about what happend and not deny doing any damage.