Please note that the relevant distance is not MXP-IST (> 1000 km) but MXP-SEA as SEA is the ultimate destination. It is always delayed arrival at ultimate destination that matters.

There is no other way than to decline the offer of miles insisting of payment of EU261/04 comp. Yes, most likely he/she will have to submit a new TK feedback every time when communicating with TK about this but it should be managable (reference to the previous feedback No's should be stated). At least TK is pretty fast to reply to feedback (not like 2-3 months as with other carriers when requesting comp. or reimbursement).

Pls let us know how this turns out.