Almost have a resolution. O2 have agreed to replace the Pre with an HTC Desire on release (mid/end of this month). They will also downgrade Nic to the £35 smartphone contract (£35, 600mins, ultd text and web) without re-signing a new contract. She's happy as she gets rid of the faulty Pre and will be paying £7 less a month for the same web and texts bundle but with more minutes. Not a bad result in the end after all the hassle.

Glad it eventually worked out in the end