I'm not educated (yet

) on this polarization of light, but to start I have this question: Is it a proven fact that photons will be polarized by interaction with virtual particals (acting as a "virtual medium") as it would by interaction with actual particles? And if so, by which evidence is this established?
Light cannot be polarized by virtual particles.
Polarization can be explained by treating light as a wave which has oscillating electric and magnetic fields in perpendicular planes.
When an electromagnetic wave interacts with a charged particle such as a free electron or molecular dipoles in a medium, the electric field of the wave causes the electron and dipoles to oscillate which in turns produces an electromagnetic wave as the charges are accelerated.
The resultant wave is going to be 100% polarized, 0% polarized or somewhere in between depending on the orientation of the observer with the resultant wave.
In the case of a free electron the mechanism is Thomson scattering where the speed of the resultant wave remains as c;
For a molecule in a medium such as air or water where the speed of the resultant wave is less than c in the medium;
Since virtual particles exist as virtual particle/antiparticle pairs the net charge is zero and therefore there is no charge accelerated by the incident electromagnetic wave and no resultant wave created.
The scattering can be treated as particle collisions as described in post #19 where light is not slowed down and not polarized.
Can you answer this still? I think these are fair questions from my end to get to know if Setterfield's thesis have any merit or not...
As I am unfamiliar with Setterfield’s model I am going by your description which makes predictions that are clearly contradicted by observation such as the slowing down of light in a medium should result in distant objects being blue shifted instead of red shifted and the lack of polarized and partially polarized photons in the observer’s frame of reference emitted from distant objects.
In the plasma cosmology theories I am familiar with, redshift is explained by mechanisms such as Compton scattering which at least attempts to explain the observed redshift, the slowing down of light in a medium is completely contradictory to observation.
On that basis alone Setterfield’s model is even more wrong than the other plasma cosmology variants.