I'm not a lawyer, but there are a couple of legal issues.

Firstly, you own the copyright in your photo, and if they photoshop it that makes it a 'derivative work', but AFAIK that doesn't save them from copyright infringement.

Secondly, if they try to "pass off" their product as yours, that is a separate tort, if you can prove it.

I'm assuming Ontario law is somewhat like England. The Americans talk about a "trade dress" action instead of a "passing off" action, although it's much the same thing. Canada? It's hard to say.

Find an Ontario lawyer before you sue them, and I agree that pursuing them through eBay is easier than going to law.