Well, there you go, the job was welding & repainting, and the two comprise a single job, contracted, paid by you. The fact that your insurance covered a portion does not affect at all that the body shop's obligation is to deliver to you all that was agreed. To the extent a refund is due, the refund should cover both the cost to weld the holes, any further body prep, and the repaint, as rectifying the poor hole repair requires another repaint. Weld, smooth, prep, paint - that is what you both agreed, and they failed to deliver. By refunding the welding charge, the body shop has essentially admitted that they screwed that part up.
I expect any unbiased third party, (judge, consumer protection agency, etc) would agree that you should be compensated not only for the repair of the holes, but the repainting that is required afterward correction of the defective hole repair.
To protect your own interests, presuming you want to take the body shop down to the mat over this, you should send them a letter, stating that the refund of the $250 is insufficient to rectify their inadequate repair, and that what you want is the holes welded shut, roof surface suitably prepared for repainting, and the roof repainted.
This gives them an opportunity to meet their obligations. If they do not agree to do so, then you have the foundation to move forward either with a consumer protection agency, your insurance company, or small claims court.
Obviously you need to decide how much aggravation you wish to endure in order to press your claim.
I think I would start with the insurance comapny. Since the paint is cracking, the job is obviously defective and there is no question who did the defective work - the insurance company's recommended body shop. I believe in any case your insurance company owes you a repaint. I don't believe they owe you another hole repair job. I believe the body shop owes you everything. See how much leverage your insurance company has over the body shop. The insurance company should lean on the body shop to solve the problem without costing the insurance comapany any money out of pocket. The body shop, if they want to stay in the good graces of the insurance company (and get future referrals), should be inclined to cooperate. If not, then there are other advocates with whom you can pursue rectification, against the body shop, and the insurance company.
Is it worth it, only you can decide. If you decide to go forward, I think you have a good case, presuming that the invoice from the body shop states "weld the holes" and you can establish that they did not weld the holes. The cracked paint in and of itself is proof that there is a problem somewhere, and I don't see how the bodyshop could argue they didn't screw up. The fact that they did not repair in the manner agreed puts them pretty deep in the hole.
If it were me, I would be inclined, once the body shop first refuses to redo the whole job, to find another shop. Not clear what kind of quality job you would get from a shop forced to rectify the problem. But you may have to give the another opportunity to refuse correct the problem prior to moving on to alternatives.
