I feel your consternation, Morrus. I had this happen to me a lot in the past from computer game companies -- though not to this extreme a degree. When I was at Next Generation, we once posted the first review of a game that everyone was expecting to be the game of the year -- and it was an utter dog. We kicked it around, called it names, made fun of its parents, etc. The PR guy ended up leaving a message on voice mail accusing us of severe bias and saying that his company would never support Next Generation ever again as we were clearly insane.
Then everyone else reviewed the game and also slaughtered it. He never followed through on his threats.
The truth is, people get really upset about negative reviews, and they have some good reasons. Sometimes they've worked for years on a product and it hurts to have a critic just tear it to pieces in 600 words. But that's the game you play, and one just has to accept it as reality. All that said, it is really rare for someone to determine they'll no longer support a publication. It's poor form -- especially to try to go to war with a pub as large as yours.
The main concerns for me, were I in their shoes, would be backlash from readers (they've gotta know it's going to get ugly when you reveal who they are) and backlash from the other publications they list in their letter to you. If I were an editor for GamingReport.com, I'd take pretty serious umbrage at the implication inherent in the letter -- that GamingReport's reviews are for sale in return for free stuff, so publisher XXXXXX will continue to support them.
With an attitude like that, XXXXX may find itself in a complete review blackout. That can't be good for business.
AJL