In need of some advice following a settlement offer from BA via CEDR please!

Brief background: Three pax. All booked on the same PNR. LGW-AMS August 15 on BA (Euroflyer) BA2826 Arriving 13:05.
Aug 4 - Email that flight is cancelled and offering new flight on BA2762, Arriving 18:30. Offer accepted.

Claim put in to BA for EC261 for three pax for arrival later than five hours due to cancellation, and flight cancelled within fourteen days.

My claim for EC261 was £660 - 3 x £220. No other outstanding amounts on this claim.

CEDR email received today. "....the airline/airport has made a settlement offer. The offer is as follows :
Amount: £495.00
Terms: "In order to bring this matter to an amicable conclusion and save both parties further inconvenience, British Airways has asked us to advise you that on this occasion it will make you an offer of settlement...."

1. Do I have my facts correct in that each passenger is owed £220 under EC261?
2. If so, given the facts as laid out here (and I was advised on FT that being cancelled this far out from departure date, EC261 would almost certainly apply) should I refuse the 'offer' and demand the full payment?
3. What are BA likely to try and do if I refuse the offer, given that this seems a fairly clear cut case?

Thanks in advance.