To me until you establish who is responsible for the fence and exactly where it is relative to the boundary, it's not possible to determine if anyone is being unreasonable.
Your solicitor will get the plans as part of the title deeds provided by the seller. The plans should have a little checkmark (like T or V) on one side of the boundary which indicates who is responsible for maintaining the boundary. But the Land registry plan is not accurate enough to actually measure the position of the boundary. If I recall, the it's not accurate to more than about one metre.
Though you can't measure, you may be able to find a sight line to another object that is clearly defined on the plan, then go and look in real life. Hopefully the boundary you find by this method is where the buried wire was.
If the other neighbour is not responsible for the fence then anything he erects must be entirely on his side of the boundary. If that's the case then he's entitled to leave you with the least pretty side of the fence as it's on his land anyway. It would then be open to you to put another fence dead on the boundary.
If the responsible person has consented to the fence being put up by the other person dead on the boundary, then it can be on the boundary. But the pretty side would usually be on the responsible person's side, as it would be if they had done it themselves.
Once you work out who is responsible for the fence, where the new fence is and where the boundary is, you can figure out whether the neighbour has either given you some land, or taken it away, or done neither but left you with the less pretty side of the fence.
- If you have lost land then the solicitor should push that back to the seller's solicitor to resolve with the neighbour, unless you ask him not to, in which case you are effectively accepting the loss of land as the fence will prevent you from using it.
- If you have gained then strictly the extra land still belongs to the neighbour, but he can't use it because of the fence. Realistically he is not going to stop you using that extra land even though he still technically owns it.
As to growing plants up the fence, I probably wouldn't even ask as all you are doing is growing plants in your own garden. But you shouldn't plant things that are likely to damage the fence panels, such as ivy or creepers that will wheedle their way through the slats, and you should control the plants when they reach the top to stop them invading his side.
As to painting or colouring, you should probably ask and he probably won't object, but you need to be sure that the finish doesn't drip through the panels and leave unsightly drip marks on his unpainted side of the fence.