Nokia offers the 2-year warranty as a result of the 1999 EU directive, yes (I forget the exact number). However, the warranty they give is a legally binding contract, in addition to any statutory rights legislation may give you, so if the EU directive isn't in law in your particular jurisdiction (the UK has only partly implemented it), the terms in the warranty document still apply.

Alternative approaches, such as the sale of goods act in the UK, give you additional and extra rights on top of the warranty (if the USB port breaks a year after the 2-year ELW expires, I will be asking the retailer I bought it from to repair / part replace it free of charge, for instance - which will probably get interesting).

Not sure what you mean about "who'd bother to go to court" ? - it's the standard remedy in cases of breach of contract where the other party refuses to remedy the breach. ADR is fine in some circumstances, and should be offered in any letter before action as a matter of course, but I can't see Nokia accepting it.

for £500, being willing to issue a case in the small claims court (or your local equivalent) is eminently well worth it, if you think you've got a decent chance of winning. Not only does the simple act of informing the company that you're willing to do so to get the breach of contract remedied usually work wonders, but if it actually comes down to it, the process is simple and costs are low for both parties, win or lose. The entire system is set up precisely to ensure that claims of this sort of size are worth doing.

godofwar424 - I'm afraid I've no idea what kind of grounds you have to stand on, having initially accepted an E7 as a replacement. It "looks like", having been accepted, nokia fulfilled the warranty - but I really don't know. A dedicated consumer advice forum or $other_source (CAB?) might be able to help you out more.