I don't think it's the wrong tool for the job Ian H – it looks exactly the same as my RTP set-up in fact.
Grotto – I'd first ask the supplier to check their stock and see if the replacement was going to be any better.
Easy enough to do – just measure from the bottom of the tool holder block to the lower edge of the tool slot and ask them to do the same on one of their stock items. If the two are the same – then there is not much point in sending for a replacement. If theirs is measurably shorter – then you have a duff item and should just replace it.
If the replacement is going to have the same problem, then (in your circumstances) I'd ask for my money back.
The base will be hard for you to machine without a mill or shaper because of the T-slot extension..
One solution would be to just machine (fly-cut) the whole base flat and then replace the extension after machining with a bolt-on replacement piece but it's a lot of extra faffing around.
"Lowering the lip" will also make the slot wider and then you may not be able to grip the insert holder securely enough. The lip also has a small dovetail machined in it that (without a mill) you may find difficult to machine, not least because it's on the lathe's centre line (or in your case – just above it).
Replace it or just send it back in my view.
Regards,
IanT