Stop philosophizing about what's reasonable and read the rules. They've been cited above.
I was under the impression that handing in your I-94 and leaving the country at least gave a fighting chance of convincing an immigration officer to issue a VWP when attempting re-entry to the States. Is this no longer the case?
"Leaving the country" actually means "leaving most of North America." The idea is to prevent "visa runs," where someone goes to Canada or Mexico for 24 hours and then wants admission under a new visa waiver. Look at the link in #13. It explicitly says
>The Visa Waiver Program (VWP) allows a maximum stay of 90 days, however once you enter the United States any subsequent time spent in Canada, Mexico or adjacent islands is counted toward this 90 day total. Which is to say, once you enter the United States, travelling to Canada or Mexico does not 'restart the clock'.
That link is from the US Embassy in Australia, but it applies ot any WVP applicant. "Adjacent islands" are Caribbean islands.
entry to the US by land from Canada entails having proof of onward travel? Within 90 days?
No. You do not have to have an onward ticket if you enter by land. You still have to leave within 90 days for some place that is not Mexico, Canada or those adjacent islands.

I understand the rules are to prevent visa runs.
However, I also understand that handing in the I-94 (which we would have obtained by crossing overland) enables us to be registered as leaving the country on the US Immigration system. Is this correct?
I also understand that it is possible, after the above action, at the discretion of the Immigration Officer to be granted re-entry to the US under the Visa Waiver Program (dependent on onward air tickets, proof of money and commitments back in the UK proving we don't want to be living or working in the US). Is this correct?
Sorry to seem philosophising, you are the closest I've got to an oracle.
Cheers
However, I also understand that handing in the I-94 (which we would have obtained by crossing overland) enables us to be registered as leaving the country on the US Immigration system. Is this correct?
Yes and no. It establishes that you have departed the US. It does not establish that you have complied with the requirements of the Visa Waiver program.
This is getting a bit tedious. What part of "time spent in Canada is included in the 90 days" do you not understand?

But if the airline won't even board you on your flight from the UK because your return flight is outside 90 days, you can sit in UK and read up all you want about it because,,,,,,
You still don't qualify for entry to the USA at all at this point.

What part of "time spent in Canada is included in the 90 days" do you not understand?
The part they are unsuccessfully trying to avoid.
Maybe it's the "ask enough and the answer will change" approach.
Immigration are not going to worry about your carbon footprint, or whether you think your plans are reasonable or not. The rules are the rules.

Speaking of carbon footprints, I posted this on a Canada branch post:
A Toyota Prius averages 5.1 L / passenger 100 km (xUS calculations) or 4.3 L / passenger 100 km (xUK calculations). We all know that the Prius is on the high side of automobile efficiency.
Passenger airplanes averaged+ 4.8 L / passenger 100 km in +1998. This is squarely in the "Prius" zone of efficiency. For specific examples, the A380 is under 3 L / passenger 100 km, and the 747-400 gets about 3.1 L / passenger 100 km.
(And just so we are clear, lower numbers are better.)

Perhaps it will help to remember that VWP stands for "Visa Waiver Program." As that name implies, the "normal "way to gain entry to the U.S., as is the morm for most border crossings, is by visa. The VWP is a defined exception to that requirement. To qualify for the waiver, you have to meet all of its requirements. Those requirements were defined so as to identify certain specific situations where the rulemakers thought putting travellers and bureaucrats to the transaction costs of a vise weren't warranted, not to cover your needs or your sense of what's reasonable. And whatever the rule's origins, the rule is what it is. Close doesn't count. We're not talking about horseshoes or hand grenades. And the discretion of officials to deny entry when the general rules would permit it doesn't run in the other direction.