The whole thing turned out to be a complete scam.
From 100+ posters, my own experience and talking to people in my area:
Target has run out of their "special" gift cards on day 1 in NYC area. And started turning people away under any and all excuses.
Including "email firstname.lastname@example.org, they will surely take care of you and honor the deal", just to get people out of the door.
Several of us emailed them and got a "go away"-email with the following insult (quote): "While this may not benefit you today, your feedback helps us make our stores, merchandise and services better for every guest."
Small mobs formed at several of the stores on several occasions and THEY got the stores to do the right thing and got a trade-in or simply a discount on new purchases.
Most of the stores were also out of ipads and couldn't even do an upgrade, as a compromise.
Engadget has not commented on it or updated the story. One could probably look and see if Target is one of the sponsors. But Engadget has never been a NEWS company, so it's not a surprise.
Manager told me that while USUALLY Target Mobile is a separate entity, this promotion was run by the Target itself (and showed me an email with instructions).
Quite an epic fail that the largest retail chain uses scam tactics to promote a new service that they refuse to support. Not helped by the matter that they failed to stock sufficient inventory of the items they are ultimately trying to promote.