Firstly, we need to calculate the total area of the four walls. Since the room is in the shape of a cuboid, we can calculate the total wall area by adding the lengths of the walls and then multiplying by the room's height. Hence, the total wall area is 2 x (7m + 6.5m) x 4m = 108 square meters.
Secondly, we need to calculate the area of the door and windows to remove from the total wall area. The door has an area of 3m x 1.4m = 4.2 square meters. Each of the three windows have an area of 2m x 1m each, that is 2 square meters. So, the total area for the three windows is 3 x 2 = 6 square meters.
Now, we can obtain the actual area that needs to be whitewashed. To get this, we subtract the area of the door and windows from the total wall area: 108 square meters - 4.2 square meters - 6 square meters = 97.8 square meters.
Lastly, we calculate the total cost of whitewashing at the rate of Rs 3.50 per square meter: 97.8 square meters x Rs 3.50/m^2 = Rs 342.30.
So, the room, deducting the area of the door and windows, has 97.8 square meters of wall to be whitewashed, and this will cost Rs 342.30.