After a harrowing month without riding the bike, courtesy this: viewtopic.php?f=12&t=11424&p=126406&hilit=headset+disaster#p126406
1/ Finally used a hacksaw to cut the top cap (it took ages) with significant damage to the stem.
2/ Went to the college workshop, begged for a hammer and a punch, set up the fork on a vise and hammered the bolt+star nut (the two pieces that had got "screwed" up!) combo deeper into the steerer with the intention of getting it out. After a point, it just remained there and refused to budge. So I just left it there and hammered in a replacement.
3/ The fiasco cost me 3k (new stem and star nut/top cap/bolt) and increased laziness to do anything (it was hell for a month without the bike).
4/ Turns out that the headset came assembled with 5 ball bearings "missing". Can someone at Cannondale explain this?
The trick to remove the star nut in case it gives you trouble: http://forums.mtbr.com/shocks-suspensio ... 30067.html
A bit of the top cap is left on the bolt lodged in the steerer, and occasionally makes a noise just to remind me not to overtighten the cap bolt, because you NEVER MESS WITH THE STAR NUT. EVER.
Guess some of you might have already known that