I agree!
"The garden is surrounded by flowers."
The Oxford English Dictionary, 2006:
BY
1) After a Passive Verb:
The door was opened by my cousin, Annie.
Damage caused by fire.
WITH
The nearest suitable definition that I can find, is ...
1) Accompanied by (another person or thing):
A nice steak with a bottle of red wine.
My opinion?
"The garden is surrounded by flowers." �
Les Douglas