As I stated in my original reply, I contacted apple support to basically be told a load of horse ****. I was told that it was a safety feature, when I stated that I had never heard of a battery expanding as a safety measure I was assured this was the case. However, when I asked for some documentation from the battery manufacturer, apple were unable / unwilling to supply this. I was then told, during the same support call, that the batteries were only supposed to last for a certain number of full chemical cycles. Again, when asked, the support representative could not provide me with any data specific to the iPhone 3GS. In fact, the only figures available were for the MacBook Pro. I wasn't happy with this so I emailed Tim Cook directly. The next day I got a call from a person in Executive Relations EMEIA and she asked what had happened and asked for photos. I got a call back from here a few days later to say that an 'Engineer' had looked at the pictures and that what had happened was normal!! She then offered me a new phone, which I would have to pay for. When I declined her kind offer I was advised to contact the shop where I bought the phone (O2) which I did. Iwas told by O2 that the 1 year manufacturers warranty was up and there was nothing I could do, even though in Europe, goods bought in Ireland are supposed to be merchantable for 7 years.
I have kept hold of the phone just in case in the future there is a recall on these.
I have to say though that this is shocking behaviour from apple. I know people who still use 5-8 year old nokia's / sony ericsson's with the original battery and these haven't expanded / exploded. Maybe this is the business model for the world's richest company moving forward??