Assuming that you did overstay (in 2008) beyond 28 days of either receiving notification of the settlement refusal or (if you were given the right to appeal) the last day that you could submit an appeal, then you were in breach of immigration rules during a period which (until Oct-2013) falls within the qualifying residential period for naturalisation (i.e. - 5 years preceding the application). Therefore, IMHO, the requirement - "not been in breach of the Immigration Rules at any stage during the five-year period" - is not satisfied. In such case, you may be eligible for naturalisation on /after 18-Oct-13 only.
UKBA can argue that a request for reconsideration / review can be made from outside the UK so you could have either:
1. left UK and submitted the request from outside, or
2. made the request and left before becoming an overstayer.
Unless UKBA admits that you were forced to become an overstayer because of their fault, I don't think your naturalisation application will be approved before Oct-2013.
Consider seeking professional legal advice on the matter.