“The ticket machine cannot offer the PAYG fare because that is only available when using the PAYG system.”
Sorry, but that sounds like a circular argument. It cannot offer the PAYG fare because it does not.
It seems technically possible for it to take £2.90 off me (ironically it would have been via my contactless card) and then put that £2.90 onto my 60+ card as an Oyster top up / fare extension.