Personally I would not of accepted my last car back, as the seat was causing me alot of discomfort. How long extra ha you to wait for it to be put right and another 4 months, which i’d say is unacceptable, also when did you actaully order this car. I ordered mein back in jan for april but because of covid had to wait another 2 months on top and then if this had happen another 4 months than would be 9 months. with a car that was now unsuitable. I had issues getting my latest car and top brass at MB had to sort it out and did.. Because of the hack on honda, they did not have any direct aceess to dvla and could not register new cars in the normal way and as we have different tax class was an issue, but got resolved. I feel for you not a great situation and imo Mbo and mercedes should put it right asap. Or they hire you a car for the period. But maybe by accepting your old car back you have accepted there solution and problaly have no legal grounds to then complain and this is probally why your appeal has been turned down. you accepted the resolution they offered.
One could pled that you did not think at the time and was dupped as you was led to believe you was driving around illegally. When in fact you was not. It’s the lease company mbo to make sure you are covered and rsa provide that cover.