If you choose, you have the legal right to sue them and argue that even though your sticker was expired your vehicle was "in operating condition". From what you've shared so far, I would expect them to respond that they disagree because, by failing to have your vehicle inspected, your vehicle could not be lawfully operated on public roads. Virginia Code, Sec. 46.2-1157. The judge will hear the testimony and review the evidence, and decide accordingly.
If I were the judge, based on your quote of the lease and that statute, my inclination would be to find that the vehicle was technically operable, and that the failure to obtain an inspection is more analogous to the specified "current license plates" as opposed to the general "in operating condition", suggesting that there was no intention to include the inspection sticker in that latter category. But that said, other evidence might be presented that might shift my opinion and, alas, I won't be the judge.

