I offer a different 'spin' on this one.
First, this is somewhat confusing, since Texas doesn't really have 'registration' as defined by other states. Other states use 'registration' to mean title to the vehicle. In Texas, the registration is was a license plate sticker, which is now put on the windshield and not on the plate itself. The intent of this 'registration' is not to register the vehicle, but to pay the applicable annual state and county taxes.
Specific responses:
"well after reading more about the offense in the penal code 502.402 says it is illegal to operate without proper insignia. I guess I am fighting a lost cause.."
*** We assume that you meant Texas Transportation Code and not Penal code. In any case, this statute does not apply in your case. It applies to FAILURE to register. You were registered, just not properly displayed.
"§ 502.402. Operation of Unregistered Motor Vehicle
(a) A person commits an offense if the person operates a motor vehicle that has not been registered as required by law. An offense under this subsection is a misdemeanor punishable by a fine not to exceed $200."
The applicable violation would be covered by TX Trans Code:
"§ 502.404. Operation of Vehicle Without License Plate or Registration Insignia
<snip>
(b) A person commits an offense if the person operates on a public highway during a registration period a passenger car or commercial motor vehicle, other than a vehicle assigned license plates for the registration period, that does not properly display the registration insignia issued by the department that establishes that the license plates have been validated for the period.
<snip>
(e) An offense under this section is a misdemeanor punishable by a fine not to exceed $200."
My suggestion:
Go to court, take your receipt from the county tax office and show the court that the 'registration' (taxes) had in fact been paid at the time of the infraction. Since the intent of this law is to assure payment of taxes (which clearly was done), it is likely that any fine might be greatly reduced.