It's also disingenuous to treat UX as a one-shot deal. In the real world, there is indeed back-and-forth and committment to the positives contained in the earlier deliverable. That they just took your work and denied your efforts should reflect very badly on both their processes and practice.

I think that while you think they're good people/company/etc., jobwise you probably dodged a bullet here. It simply displays poor ethics on their part.

Lastly, paying a prospect for their time in this context is indeed something 37Signals has talked about working well for them. Pity it wasn't these guys.