I would take the "revise the paper" option. I took a doctoral level class where something similar happened. We all failed the paper (about a dozen PhD students!) and had to rewrite them. We had been furious that the expectations had not been followed consistently, but we rewrote them and the grades were OK in the end. In fact, I ended up learning an incredible amount from the professor and later asked her to write me a recommendation that won me an important research grant.
It was the "class from H***" and we called it at the time, but I learned a lot and eventually reconciled my relationship with this professor.