EEA3 and EEA4

Hi all,
me and my wife applied for PR couple of weeks ago(using EEA3 n EEA4) and i (non EEA) recieved COA after a week confirming my application etc but nothing for my wife(EEA natonal).Today we recieved another letter from HO in my wife's name stating that although she has been living and working in the UK since october 2004,she didn't apply for WRS till May 2005 therefore neither me or her eligiable to apply for PR till May 2010.My wife didn't know about WRS and worked till april 2005 without it although she has all payslips,contract,employment letter and p 60 for this period.HO given us 21 days to withdraw the application or they will be refused automaticaly n all docs will be send back to us.my question are-
1.Why did they give us 21 days to withdraw,not just refuse our applications?
2.What are our options now/wait till may2010?or can we do something about it?
Please help on this.Many thanks
3.

Guys Anybody there please

Under the A8 Accession policy, your wife would need to apply for the WRS if she is working in the UK for her resident to be lawful.

If she was exercising treaty rights in any other capacity, then WRS would not have been required.

Under the rules, your application cannot be formally refused until you write your intention to proceed with the application.

If you have evidence she was exercising treaty rights in another capacity, you can provide it, or else they will refuse your application, and might not give you the right of appeal, as she has not completed 5 years of lawful resident.

[b] Caseworker Instruction for A8 National[/b] wrote: A8 Nationals and their family members are eligible for permanent residence once they have exercised their Treaty Rights in the United Kingdom for 5 years.
The time spent in the United Kingdom prior to 1 May 2004 does not count towards the qualifying period for permanent residence. However time spent as a registered worker on the Workers Registration Scheme will count towards the qualifying period.
If we receive a request for permanent residence the applicant should be informed that /she does not qualify for permanent residence and will only be entitled to a document certifying permanent residence when s/he has exercised Treaty Rights for 5 years in the United Kingdom. S/he should also be told that his/her application will be treated as withdrawn after 28 days unless s/he indicates in writing, that s/he wishes to continue with his/her application.

Since your wife applied for WRS only in May 2005 she worked ilegally during Oct 2004 - Apr 2005 and as such HO doesn't count this period towards 5 years qualifying period.

Many thanks Obie,
That makes sense to me now.I'll write them a letter to withdraw the application and then apply in May 2010.Many thanks again