I'm a little bit confused. By the time you canceled your prepaid reservation, had your card been charged the prepayment, or not?
If "they happily refunded the full amount" that implies they had charged your card before check-in. That's exactly what it should be like ("prepay" rates being truly prepaid), but it's not how it's currently being processed. But you said you like how it's currently being processed so I guess I didn't quite get it.
Sorry if it was a little confusing.
Basically (and this was 13 years ago), the hotel charged the credit card on file. But even though it was a prepaid non-refundable reservation, they happily refunded the amount.