This will be a civil suit (not fraud) because the service was performed. It's not a contractual issue, it's a quality/warranty issue.
The email may help your cause, but she could easily claim she just said that to diffuse the situation and get you out of her store. If she has attempted to fix some photos (and if you have anything like that in writing) then that helps your cause as to inferior quality.
Look into small claims court because I'm not sure it makes sense to hire a lawyer for the amount of money we are talking (<$3k, I assume). If the photos are indeed bad a judge might side with you. Collection will be a different story, but I think it's possible to seize equipment if they don't pay a court mandated judgement.
File a complaint with the BBB first (even if she isn't registered). If that doesn't work, tell her you are going to small claims and then follow thru.
If you paid with a CC you can try to see what they can do, but sounds like you are probably beyond their standard 60 days to dispute a claim.