You're entitled to a replacement, but they're also entitled to offer to fix it first. Failing that they can then give you a replacement. I think the two week timeline is reasonable (there is no specific legislation on timelines). However, you should keep in contact with them over the two weeks.
If when you get it back and it's working - then fine. If it's not, then you can reasonably ask for a replacement - however, they can still offer to try to fix it again. It's down to your negotiating skills at this point in time as there are no hard and fast rules on when replacement should kick in instead of repairing.
I would be wary however, about the comments regarding the dropping of the machine from a 1m height. Whenever you do hand over this machine to them to be fixed, make sure you get some sort of receipt confirming that it's in good order when it left your possession.
I don't understand why they would make that kind of stipulation, but you should just cover yourself in case they've dropped stuff before.