Why the Brits thought that sleeve valves was the right path IDK.
I'd hate to say the Old Boy network, but it's as likely as anything. Bristol was a big company with a good reputation during the 20s, coming out of the Great War having supplied one of Britain's most reliable aircraft, the F.2b, which continued production and reconditioning of existing examples for continued service and export after the war ended. Bristol built engines proved reliable and able to meet requirements in 1920s aircraft, as they were widely used and exported in that decade and the 30s, the Jupiter and Mercury being built under licence abroad. Aircraft wise, Bristol, like every other manufacturer entered designs into almost every specification imaginable to get work, and sometimes their designs registered, such as the Bulldog. The company had a reputation for reliability and it also had money, which helped. If the engine company promised an engine could do such and such, there was a tendency to believe it, why wouldn't those concerned not believe the claims about sleeve-valves? After all, Fedden had a good reputation and produced good reliable designs in the past.
In peacetime the formidable challenges of building these engines were not as readily apparent as they became once the pressures and expediencies of wartime mass-production and high sortie rates by individual aircraft started to happen, so the complexities of the sleeve valve were easily absorbed into the sedate day-to-day operation of a between-the-wars Britain. Once the pressure cooker gets turned up in the late 1930s, the cracks - literally - begin to show.
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