That has to rank as one of the best written, most cogent posts I have read for a very long time - especially from one at the start of their prospective career. You are obviously an intelligent individual - either that, or you have a knack for words, in which case you'll find ISS a doddle or end up as a journalist.
I wouldn't be overly worried about an initial rejection; often the important thing is how we react to disappointments. It is very easy when things are going well, not so when they aren't. It's how an individual reacts to those difficulties that marks them out. Keep plugging away, if you really do want it enough, this will be a minor set back, and as has already been stated, there are an awful lot of people sitting around crew rooms who had to apply several times before they were successful. I remember my first AEF flight when I was in ATC. My pilot at the time was a Buccaneer driver and he told me that between him and his last nav they notched up 11 attempts at OASC, and he was told he'd make a 2nd rate Herc nav on a good day with the wind blowing in the right direction. And whilst I breezed through my UAS selection, if you count Flying Scholarships, it took me 3 attempts to get past OASC.
Keep up with the degree, especially if you enjoy it. As far as the RAF are concerned, they really don't care what you do. However, if the RAF doesn't work out for whatever reason you will have it to fall back on.