So after an initial strong, helpful response from the dealer over this rejection & replacement, things have taken a bit of a nose dive, with limited information and updates.
Got an email from the sales manager yesterday saying that MG UK were rolling out their usual line that it's a characteristic of the car but they were 'vigorously advocating on my behalf'!
Needless to say I have replied to him in a polite but very strongly worded e-mail stating that my contract of sale is with them, not MG UK and suggested the issue of whether or not MG UK will reimburse the dealer for this rejection is very much an internal issue between them and MG UK. They are a big dealer so I'm sure they would have some leverage with MG UK.
I have given them a deadline of next Wednesday to provide in writing an agreed course of action with a timescale to avoid escalation, but at this point in time, it seems increasingly likely we'll have to resort to legal action.
Such a disappointing start to ownership of what is a great car, failed by this fundamental QA / design issue and lack of acknowledgement of the problem.