I feel almost petty saying this after all that, but is the "Local Currency" option broken on the web wallet? I was expecting it to change the USD amount (e.g. to GBP) in the top-right, and the converted amount reported when sending money, but they seem stuck as USD whatever "Local Currency" is set to.
If you click the BTC amount in the top right it should alternate between your local currency and btc.
Ah sorry - I meant that the local currency used doesn't switch to GBP, it stays as USD for me, whatever I choose under "Local Currency". (In Chrome, not tested in Firefox/IE)