I'm going to jump in here and say that it is not uncommon for a switch to have issues when it is compressed too much. My bet is there would have been no further issues if you had just bought a flat top cell which is not expensive rather than continuing to mess with it the way it was. I have no idea at this point whether the driver, diode or both got fried because of the intermittent connection but I do know that you shouldn't have continued to use it with the issue. I get the excitement thing and wanting to mess with what you paid a lot of money for and why you did it and it's probably not exactly fair for me to sound a bit harsh since I have a background in working with electrical equipment. You used your new laser as anyone would want to.
That being said, if podo didn't say that you specifically needed a flat top cell then that's a fail on his end as it must be assumed that any buyer would not know the difference because it would just seem like you had a nice strong connection so that would mean it should work even better.
Hard to know what exactly is fair in this case and I'm sorry you had a problem. What exactly is happening at this point? I really hope the diode didn't blow.
Did you check to see if the battery still fully charges and also read the voltage across it?
I'm not trying to be mean about any of this. You'll just have to trust me when I say I REALLY wish things had gone better with all of this. I believe Sanwu/Podo products are high quality and they certainly look like beautiful classy works of art. I hope all of this turns out satisfactory for all parties involved.
On a seperate note 800mW is NOT NOT NOT low powered!!! Please let's agree that <5mW can be referred to as low powered. I can light a match with about 35mW of 405nm. These are dangerous lasers and it does not matter if you can build a 10W laser for a nickel. Availability and price have nothing to do with a diodes power and all lasers including those under 5mW are a potential hazard. 2-3W lasers may be available cheap and this idea that that somehow makes them the new standard in a beginners first laser is disturbing. Generally when someone mentions 800mW what they are actually referring to is a 405nm at that power and that is one nasty laser.
Have fun and be safe