time barred debt

About 10 years ago, I had serious financial 10 year relationship ended I no longer had a 2nd income to rely on and I got stuck with a lot of debt. I got behind on all of my bills and eventually came to realize that I was going to have to sell my home and/or file bankruptcy. I didn't want to file bankruptcy. I had 3 credit cards that I was WAY behind in paying. In April of 98, I contacted all 3 companies, explained my situation and 2 of the companies set me up on payment arrangements. One company, Capital One, never responded to my letter. I sent another in June of 98 and another in Aug of 98. My account went to a collection agency so I sent the collection agency the same letter and copies of my letter to Cap One. 2 collection agencies and one attorney later, I never got a reply from any one of them. I got creative, I sent a registered letter to both the CEO and CFO of Cap One explaining my plight and asking them to help me settle my debt. NO REPLY. I chased them from April 98 to Jan 00, I finally gave up. Last year, (May 07) I sent another letter to the CFO and got a reply telling me that they couldn't help me because the account was no longer on the books. I recently got a letter from a collection agency and immediately responded telling them that I would LOVE to pay this off. My credit limit was $500 and with the accumulation of fees they're billing me $4k but are willing to settle for $2k. I don't think that's reasonable. In June of 99, a year and more than a dozen letters later my balance was only $1770 and the payoff $1075. I don't think I should be held responsible for fees incurred after 98. Basically, I feel as though I'm being financially penalized because someone at cap one didn't do their job. Every time someone didn't respond to my settlement attempts, my balance went up. I do want to pay this off but I want a fair settlement.
The agenct emailed me today and said they were contacting Capital One to determine exactly what, if anything, their account notes have regarding my efforts to resolve this back in 1998.

My questions: Is there a statute of limitations on credit card debt? Can this 10 year old debt be reported to the credit bureaus? My fico scores currently range from 765-788, this would easily drop them 200+ points. Can this collection agency take me to court if I don't agree with their settlement terms?

Though I have very intention of paying a reasonable settlement, a law student told me that, at this point, this is considered a time-barred debt and that it was more of a moral obligation than a legal one. The agency can bill me forever but they cannot do anything to me if I don't pay.

check with your atty general...there is a sol on debt and negative information cannot be reported after 7 years