My Squable with 2CO. Should I write this off? Or Stand Firm!

Back In 2009 I paid $49 to 2CO (2Checkout) as I wanted to try out their service.
(For those who are unfamiliar with 2CO, it's an online payment processing service that helps you accept credit cards, debit cards, PayPal, etc).

Their "application process" asked at the time to show them a website that we planned to use their service on. We submitted our main site which links to all our independent sites, however this was not suitable for their approval. I was swomped with other projects at the time, and so from there I totally forgot all about them as it was not a priority.

Last month I received a 2CO newsletter, which reminded me of them again, so I contacted 2CO and told them I had previously paid them $49, but never really used their service. They then gave me a coupon for a new free "application proccess" of which they now charge $10.99.

The following back and forth is the result of this.

2CO: "the business category of products and services that your website represents is restricted by our upstream providers. These restrictions are based on industry wide statistics for your business category."

ME: "It would be appreciated if you could refund the payment of $49 made to you for your services of which we have to this date been unable to make use of."

2CO: "The normal application fee is $10.99 not $49.00. Additionally, a promotional code was used to open this account which waived the application fee. No refund can be applied to this account as no fees were paid."

ME: "A fee of $49 was paid to your firm in a previous application. The approval was halted at the time for similar unclear reasons. Your service was never used by us, and our account was eventually closed. We were recently advised to reapply with a new account and were given a coupon. Your approval process is still not inline with our products, Thus your firm owes us $49.
Please advice if we need to escalate this further."

2CO: "At this time we are not able to refund the fee you paid when submitting your application. The terms and conditions you agreed to as part of your application submission state that this fee is non-refundable. We wish you the best of luck with your business."

So, that's where I am at right now. I did let them know that due to the fact that a payment of $49 was made in order to provide a service which 2CO to this date has "not" provided based on its approval process, I may decide to escalate the matter further.

I understand that my original payment to them was made way back in 2009, and even though the $49 is not going to make or break me, in my opinion, sometimes it's the principal of things that matter at times in business. If I pay you for a service, then provide it, if you are unable to do so based on "your" approval process, then don't sit on my money.

I will keep you posted, however welcome your input / feedback.