I sympathise with you as I experienced various problems with two of my N95-2s. Don't worry about using the Nokia freepost - I certainly didn't trust this when sending back my handsets - I sent mine via Special Delivery:
http://www.royalmail.com/portal/rm/j...mediaId=400026
That'll cover you in the event the phone gets lost. You can also track it online and see who signed for it in the form of an ePOD (electronic proof of delivery). This way you can prove it was received at the warehouse. Nokia tried to mess me around with this and stalled sending out my replacement handset until the ePOD was available on the Royal Mail web site (see, it can take a few days for the ePOD to appear after a delivery status of Delivered). Incidentally, I'm pretty sure Nokia has the means to check if the warehouse has received the handset or not.
I would definitely send the phone back for replacement - it obviously sounds like you've received a refurb. I doubt the Nokia Care point will exchange your phone for a new one so I wouldn't even bother with them. Why would you want a refurb cleaned up when you could (eventually) receive a brand new replacement?
Hang on in there, it gets very frustrating but it's worth it in the end.
Hope this helps.