Just jumping in, I think the story of how you got from a fail mark in a formative to the best mark in the year in the summative is an amazing example of handling feedback well and I would highly recommend making use of it. I would definitely not be concerned with looking bad because you got a fail mark.
First of all, the entire purpose of the question is to showcase how you improve as a result of negative feedback - which requires you to mention something you had struggled with. This is because law firms are not looking for perfect "finished products" candidates; they are looking for people who demonstrate exceptional willingness and capacity to learn when given the right support, as they are the ones who will get the most out of a TC and become great practitioners. Secondly, even if there had been any downside to you mentioning the fail formative grade, it is completely outweighed by how impressive the achievement of getting the highest grade in the year is.
Finally, I think that while it is not ideal, it is certainly not prohibited to mention experiences that date back a few years, such as A-levels. Nonetheless, before mentioning that, I would firstly look to fill the answer time with a more in depth presentation of relevant recent experiences.
