I actually got a written advisory from a consumer direct adviser which meant I was slightly off in my original assumptions. Essentially the law says you're obliged to give them ONE opportunity to rectify the problem after which you can demand a refund and void the contract.

Having said that they're still insisting that they are not obliged to give a refund at all unless you have no reception and return the phone within seven days. It's not in line with the law but they know you can't really do much of anything in the store. I suppose they assume that if they stubbornly repeat the party line most people will give up.

So the moral is, whatever you do DON'T BUY A PHONE FROM A VODAFONE STORE! If it goes wrong you'll be treated very very badly.