a display item should never be sold as 'new' because it isn't - it may have been demonstrated to dozens (or even hundreds) of potential purchasers, many of whom will have twiddled the knobs and explored the settings.
It's tempting sometimes to take the display model, especially when it's offered at a discount, or is the only one in stock, but beware - you're effectively buying a used item.
Having said that, the retailer's obligations to you under the sale of goods act are exactly the same as they would be for a new item. I also see no reason why the manufacturer should want to escape entirely from its warranty. You should be able to negotiate a reduced term with a fair-minded company - after all, they know that you're the first 'real' owner don't they?
If you are refused point-blank I would award the company my Forum Editor's "mean-minded maker mark". Why not go back to them and tell them that?