personally the grounds of appeal should be that both Hamilton and Trulli (plus there teams) were confused, Hamilton/Mclaren played it safe and Trulli/Toyota assumed he could take it back. They should appeal to be demoted 1 place really, not 25seconds.
Can they demote someone 1 place?
No way did he deserve to get such a severe penalty. It's times like this that the FIA needs to just use some common sense.

the full British gp 1998 parts from that year is on youtube even.