Further to Dzug's post:
The 'exchange policy' relates only to goods which are not defective. You retain your normal statutory rights in respect of defective items.
When goods are defective, your right to a refund (rather than to a repair or replacement) only lasts until the point when you've legally 'accepted' them. The length of the 'pre-acceptance period' isn't defined in law but it should give you time to check that everything is (apparently) OK with the item. Once the pre-acceptance period has ended, you still have the right to demand a replacement or repair, but not to a refund.
My opinion is that, if the stone came away from the setting on the first time that the earrings were worn, they've never been legally 'accepted' and you therefore retain the right to a full refund. However, if you'd be happy with a replacement or repair it might be simpler to press for one of these options, as it would avoid having to argue about whether the earrings had been 'accepted'.
Chris