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Originally Posted by HarryT
STFU?
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"Shut the f* up."
Which is not literally what the publisher said, but very close. Some excerpts:
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wow, i truly cant believe that e,mail. you go girl. this one one hell of a story about dealing with unstable writers
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we did what we had to do to make the story printable. you should be thankful, not complaining. ah, the ungrateful writer, gotta love it
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any more correspondences from you must be from your lawyer. ... i dont waste my time arguing with writers over legalities. thats what lawyers are for.
you are so funny.
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While I suspect her letter to the publisher wasn't as calm or reasonable as you (or I) would consider proper, I don't believe it warranted that kind of response.
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Certainly doesn't sound like a very good deal for the author. No payment, no other distribution for the story for a year, not even a free copy of the book? Makes you wonder why anyone in their right mind would agree to such a thing! 
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Before ebooks and POD, accepting such a contract for the advantage of getting in print at all was reasonable in some cases. Sort of. While a good author was better holding off for a paying deal, "I have been published, and not by paying for it myself" was a mark of some distinction, and useful on a resume and possibly a way to reach other publishers.
Of course, before POD, a publisher wouldn't be willing to take the financial risk of untried authors unless they (1) knew they had a great eye for talent and (2) had excellent editors on staff.
Excellent editors don't use apostrophes in verbs, and an eye for talent means not bothering with works you think are so bad they need extensive editing. And at no level of business is it reasonable to mock and insult the people providing you with what you want to sell.
However, she does have her rights back and can seek her own market for it, and if that's the level of editing they've done, I doubt the book will sell enough copies to impact her future career much.
I do think she should attempt to get her name removed from it and a pseudonym used instead--I know that some authors have managed that in the past, but I don't know if that's because of specific contract arrangements.