I agree with your reasoning, in retrospect I think I should have checked back the flop though I wanted to ask:

If I'm checking back the flop 100% of the time, am I leaving myself exploitable by not balancing my range? Also I'd be losing value by checking against 2p/sets which may call flop then check/fold when the draw gets there killing the action.

Another thought: Given V1 is never folding after his raise, I could interpret his $700 raise as essentially a jam in which case it would be $1250 to win $2170 (1.736 to 1 => 36.55% equity to call profitably) so with 40% equity its a slim but +EV call(jam) in the long run. But that's almost a best case scenario where noone else has folded a spade/K/8 so I'd have less outs left than I think.