This model seems reasonable, but I think bettors should mostly ignore the possibility of rejected mail in ballots, because the effect is extremely uncertain and around the same magnitude as many other idiosyncratic factors that should mostly wash out. For example, if there’s severe weather or an outbreak of COVID on election day in a crucial swing state, that will hurt Trump much more than Biden because a much greater proportion of his voters are voting by mail (essentially the “rejected in person ballots” effect you mention).
This model seems reasonable, but I think bettors should mostly ignore the possibility of rejected mail in ballots, because the effect is extremely uncertain and around the same magnitude as many other idiosyncratic factors that should mostly wash out. For example, if there’s severe weather or an outbreak of COVID on election day in a crucial swing state, that will hurt Trump much more than Biden because a much greater proportion of his voters are voting by mail (essentially the “rejected in person ballots” effect you mention).