rejected for tourist visa. do they ever reject people for 72 hour free transit?

Bloggs, it's really difficult to say. If you applied for Chinese entry permit and got refused, I guess that the immigration office might be able to see that you were rejected. It's possible that they may not let you enter.

I personally think that you should try to apply in advance. If you are granted, then you can use it to visit PRC. If you are not, you at least needn't pay the flight back when you don't get the 72 hours free transit.