From my short experience with Apple reviews you must expect all kinds of rejections and don't take it too hard.
The library folder is indeed backed up automatically. It is only relevant if the user restores the complete system from iCloud (for example if moving to a new device).
I'm not sure that there is a 100% correct answer for this situation. See this thread for example:
http://stackoverflow.com/questions/...ple-devices-with-non-renewing-in-app-purchase
Seems to me that you just need to make the registration feature optional.