Delta can exclude certain damages as long as the bag is subjected to the normal wear and tear that you can expect in an airport. The wear and tear on bags is pretty intense, but his bag had held up pretty well.
In this case, the allegation is one of negligence. No company can write terms and conditions in which it excludes itself from its own negligence. However, here is your problem. You are dealing with a notoriously anti-customer attitude. The bag has, by your own admission, been used for some time. The second hand value of the bag, compared the grief and effort required to pursue legel action is probably not worth it. Delta know this. They will stall every effort because in reality they do not expect you to persue it.
I would send a stiff letter of complaint and hope you find someone remotely sympathetic. The indifferent response you got from the 3 Delta staff you dealt with at the airport typifies their attitude and is the most likely response you will get from the letter. At that point, all you can do is post negative comments about them here, my3cents, consumercomplaints, etc.. and stop flying with them. They are a huge monolith with no incentive to change.
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