2008 128kmi Prius Hybrid System Malfunction & is this my mechanic's fault? What's my recourse?

If this is the wrong subreddit, please let me know where to go for advice, thank you!

Last weekend 1 hour into a 2 hour trip, got a big red ! light, the engine felt slightly unresponsive, and smelled funny, so I pulled over. It had run out of oil 3k miles before a change was needed and with no low oil indicators. Some kind soul stopped and helped me, we got some oil in, light was off, and sent me on my way. It was a harrowing drive home (car was clearly not happy, still felt unresponsive) but I made it. Took it to my mechanic, he said the problem wasn't the oil but the transmission seal had broken. So he replaced that for $700 (my boss verified the cost, apparently its a bitch to get to). He couldnt explain the relation to the oil. Pick it up on Saturday. After 30min of driving, red ! light comes back on, but I make it to where I'm going. The mpg was a little low at 35 compared to the usual 50. As i returnrd home the today, the hybrid system malfunction light comes on, the engine smells funny, and then the car died while we were going 50 on the highway.

So I've got a couple questions
1) how likely are these two breakdowns to be related?
1a) If so, should I take the car back the mechanic and see if he will fix the real problem and not double charge me?
1b) And do I have any rights/legal recourse if this is somehow a result of his repair from last week?
2) Am I an idiot for taking a Prius to someone who doesn't do primarily priuses? Should I only be doing dealership? I'm new to Boston, young, and have no idea what I'm doing.

Thank you in advance.

Edit:
Recent repairs
-12 aux battery in the fall
- front Axel in late winter. Car was shaking quite violently when driven over 50mph, I ignored it for about a week. Took it in, mechanic said dirt and grime had gotten in and corroded it. Cost me about $1k in repairs. Two colleagues who know cars doubt his diagnosis. But outside feeling like I'm paying an arm and a leg every time I go, he's given me no reason to doubt him.

 

Its definitely not the oil. Checked that first thing.

I should have been more descriptive as well. When the car died today, I was driving around 50 and the engine just cut out.

 

1 qt took it from the low notch to the high notch, which is weird considering the capacity is 3.9qt (according to the internet), so I am probably missing something? Perhaps the low notch is not really "out of oil" and it didn't fix the problem. Perhaps, it was just the act of leaving the car off for an hour (while I figured things out) let things cool off and reset. But I don't know enough about cars to verify this.

Thank you for the blunt advice and summary, it is much appreciated.

Just some short notes
1) Dashboard lights: Red ! in a triangle, ABS malfunction light, check engine light. Turning car off for an hour and filling with 1qt of oil takes care of all lights except check engine. Perhaps the lights were triggered by consequences of low transmission fuel, oil level just a coincidence.
Something definitely leaking from my car when I leave it over night(I can see all the drops under my parking spot)

2) Mechanic claims code on check engine light was for transmission. Mentions tons of transmission fluid under the car and he finds the source, the broken seal.

3) Shortly after, same lights come on AND the hybrid system malfunction light (perhaps got messed up from the first incident with the tranmission oil?)

4) I think a specialist is definitely in order, any thoughts on dealership vs. specialist? Do you have advice on how to find a good/honest one? Is yelp/google+ really the best resource? I'm in Boston if anyone knows the shops.

5) You're right. I think I've allowed myself to be overly intimidated by the hybrid aspect of the car and treated it like a blackbox that does magic.

 

Inner shaft seal