Final update:
Eventually restored from TM by resetting OSX partition to a single contiguous volume (had originally set it as a System and Data partition as per pre-crash state) - that did the trick and restored the TM OSX System partition successfully. Then re-partitioned back to an OSX System partition and OSX Data partition (and recovered data from TM), sweet for my backup regime and I share the Data Partition with 'Ignore Owners' set for iTunes/iPhoto and all data sharing between accounts. NB: Throughout this procedure I left the original XP partition untouched.
To finish and re-fix XP:
1. Used Tuxera NTFS to access XP partition from OSX and reconfigure boot.ini to reflect the correct XP partition for boot (now partition 4). Sweet program.
http://www.tuxera.com/products/tuxera-ntfs-for-mac/
2. Used rEFIt to configure boot up for OSX or XP (for flight sim use only). Very neat bootloader.
http://refit.sourceforge.net/
3. Used Apple advice to bludgeon XP SP3 to work (SP3 Copy Error Dialogue). Go figure, but it worked.
http://support.apple.com/kb/HT3841
Now back up and running thanks to TM. Also now run a scheduled Bootable System Clone just so I don't have this faff in case of emergency.
So, in 4 years of Apple use - my first major install problem (ironically with an XP install) ends in success, largely due to TM and the ease of recovery.
Best of luck y'all.
RM