I think everything necessary has been said and I'm sorry if things are unclear.
In order to attend the event, I made it clear that a minimum 2 night stay on the group rate was necessary, and that if you wanted to take part in HGP promotions, you had to register online to agree to t+c. The t+c were written by HGP, not me. I agree that it may have been better to have the promotions after the event and I made this point, but I'm sure that there was good reason for doing it before.
As for what happens if someone cancels their London reservation? I would say it is within HGP's right to not award any bonus points and to revert the account to the status it was before the event. I would not be surprised if status continued, as a goodwill gesture on HGP's account, but I doubt bonus points would be awarded, especially with the overlap for the general promo.