Has anyone ever been discharged incorrectly? What did you do?

Medical rather than general? Sounds like someone in S1 was doing you a favor. I think you have better access to veterans benefits with a medical discharge.

Go to https://www.va.gov/discharge-upgrade-instructions/ Sometimes on the VA websites you need to find other related information and the huge number of pages you can get lost in.
From google you can find a page as I did with the phrase site:va.gov (no spaces in site:va.gov )
For this I used discharge appeal classification site:va.gov
Lots of good uses for this strategy, let's say you hear all kinds of contradicting info about what is good for your health, search what medical schools and hospitals related to universities say with
nutrition diet paleo site:.edu
Perhaps the grounds for appeal are complicated and not clear cut - ask for assistance from a vet organization that helps someone get legal advice
In the Vietnam era I had a quick almost no evaluation for medical problem, but a public Honorable discharge There was some time when I wondered about consequences of having to get discharge ASAP for my sanity
Good luck!

The reality is that the actual reason for discharge (whatever chapter 4, 15-7 etc) means less than how your service is characterized (Honorable, general, OTH, etc). So I'm not really sure what you're asking about.