I'm so glad you're getting your band fixed, but so sorry that this was your experience. I hope the pleasure of wearing it when it comes back properly fitted goes some way to making the memory of the hassle vanish.
The argument you heard that "it's an Apple product" bears on a recent experience I had with the Apple Watch bands, and is a telling summary of what seems to be a bit of tension between the two companies' practices and goals. Since the Series 4 is my first AW, I didn't have a chance to buy bands from previous releases, and I really wanted the Equateur Tatouage strap from 2016. I knew it was a long shot, but you never know what inventory Hermes might be hiding somewhere in the world until you ask. I walked into the store nearest me (London), and to my shock, the sales associate who looked up the item number and said there was one in the storeroom, but she cautioned me not to get excited because they might have already sent it back to Apple. I was perplexed by this, and she explained that Apple had recalled all the "old" bands and was requiring Hermes to pull anything from before 2017. Now, this is NOT how Hermes does things. What Hermes does is keep inventory until it sells, raising the price on that inventory around 6-10% every year. Do you want a silver ring from ten years ago? No problem-- just pay up the compound interest it's accrued while sitting in a drawer somewhere, and it's yours. (The company does have a twice-annual Paris sale, but it features trend-based items like ready-to-wear, shoes, and scarves. No handbags, no wallets, no fine jewelry-- with few exceptions, those sit until they sell.)
To my dismay, the Equateur strap London had had been shipped back to Apple two days before I asked for it. I called my sales associate in the New York store, because I knew he would do a worldwide search for me and pull in any inventory that a store might be hoarding. He found three more Tatouage straps in France, tried to call every one of them in, and in every case was told they had been inventoried and reported to Apple, which had demanded them back. Hermes would be glad for me to buy one, my sales associates would be glad to go to the trouble to get one-- but Apple says no.
I wrote to Apple about this, asking what they're doing with the bands that many people would gladly pay them for if they would only agree to sell them, and I got nothing but form-letter replies.
So-- although we had opposite customer service experiences with the straps-- it seems you and I might both have experienced the symptoms of dueling corporate policies, and Apple clearly "owns" the watch and its accessories.
Oh yes, sounds like you got a little bit of Hermes haughtiness there! You're exactly right about the toile bag you unfurled-- it's the dust bag, dust being one of leather's sworn enemies. Some of the bags also come with clear plastic "raincoats" tailored to the dimensions of the bag. Both accessories sell for healthy amounts on the secondary market, believe it or not-- along with the Hermes boxes, shopping bags, and even the ribbons they use to tie up the packages.