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@Khornight2
t-4003 - Officially you are supposed to use the bike you get with the scheme for 50% of your trips to work, practically the tax man doesn't check and it doesn't help your employer to check either. But if for some reason they decided to be barstards about it, your wife could be done for tax evasion. This isn't going to happen, I'm 99% certain...
The scheme can cost a relatively large amount to administer, particuarlly for smaller companies, although I beleive there are agents that for a cut (which can be added to the employees "bike rent") will do the administration. As has been noted it is similar to childcare schemes, but is actually more complicated and is more like a pension scheme.
The cash flow impact can be mitigated by loan companies that again take a small cut from the amount the employee saves. And insurances so theft/loss/etc can be covered. There can also be a fairly hefty legal cost for companies, as it is a benefit and as such can impact on (well, create) contractual obligations.
The fact is most of these things are done by relatively medium sized companies for pensions/childcare vouchers/season ticket loan/private medical schemes/car allowance or company car schemes. If your company runs the above, they will have everything in place to do the bike scheme.
As for sympathetic bikes shops. I'm aware that some have very happily given £1000 of their ticketed items (even for only £900) and writen what ever was asked for on the bill.
Blue, you could always get a £500 frame and personally buy the other parts, so long as you get two receipts (as officially the employer does own what is bought with the vouchers) one for the stuff you buy and one for the frame it'll be fine...
Remember it's offically a rental scheme, it's up to the employees descretion if he lets you buy the bike at the end of the rental period and it's up to them what the fee is (more or less!)