I've already done it now. It's only £60 and I've asked to see the terms and conditions three times and been told they don't have them available so they can't defend something without the original terms. If they suddenly produce them I'll challenge through that route. As far as I remember it says the offer has to be redeemable within 3 months of joining. The offer was a free bet which I redeemed. They then changed their minds and said it had to be settled within 3 months which I don't recall. I also argue they have a responsibility to reject bets that don't meet their terms at point of sale just as any other industry would.
As its an online bet it should be declined at the point of sale, however they could argue the bet had three months to be declared a winner. You are quite right that redeemable and settled are completely different but 3 months to redeem a bet is a long time, generally its a week (four days and less in some cases) to a month on new accounts/free bets. Not sure how you can prove what you are arguing but Betfair should have removed the bet from your account once the 3 months had expired, the fact they didn't is in your favour. Its all down to the interpretation of redeemed and settled and proof this was on the promotion.
You have in my opinion been completely shafted and you probably didn't know about IBAS, they are very effective and the threat of getting them involved was enough for Betway to pay me last week under disputed circumstances for a bet I placed in January. As i said the dispute is looked at in the name of fairness and not on legal, moot points.