Questions:
1) Is the above understanding correct?
Sounds like it. I like to explain it to regular folks like this... Think of your public Bitcoin address like your home address. Anyone with your home address can send you mail (BTC), but you can't access the mail (BTC) without the mailbox key (private key).
2) If I am going for long-term investment, I should use a paper wallet. What's to stop me keeping my wallet address on one piece of paper and my private key somewhere else? So the two aren't kept together.
Nothing. Where you keep your public address is irrelevant. All you need to keep safe is the private key.
3) Can I choose my private key? For example, could I generate my private key from the first paragraph of my favourite book? That way I will never have to write it down nor store it with my wallet address. I will never forget it, provided I use the same method to recreate it each time I need it.
Yes, but it is highly likely your coins will be stolen. This is called a brainwallet. Google it.
4) Does my wallet address ever change?
No. However, when you spend bitcoins, many wallets will use a "change address" where your change from a transaction is sent to another public address.
5) How do I create a wallet? Is the address allocated to me?
Depends what software you're using. There are many options. My favorite way is to use software called "vanitygen" that lets you search for addresses that begin with characters you select.
5) Living in the UK, where can I get my coins from in the first instance? I've heard bad things about Coinbase. What is this localbitcoins.com website? Is it safe to buy this way?
Exchanges are probably the easiest way. You could also try selling things on this forum or even mining your own.
Thanks for your help.
You're welcome. Good luck!