You are confusing the refund on the balance transfer fee with the £20 cashback. Balance transfer within 60 days, you will initially be charged a 2% fee which will then be refunded within 28 days. Transfer a balance of £1000 or more within 60 days and receive £20 cashback.
So you have to transfer £1000 at a fee of 2% to get £20... err hardly deal of the year!... you can't use the £20 to pay down your balance, infact unless you transfer exactly £1000 you either don't get the £20 to pay the fee or you get a larger fee than £20.