So I spoke to Rick O on friday night about my rear brake issue and my ride height and did the following today after i got back from camping.
I struggled for a while to removed the caliper because the disc is so badly worn it actually has a lip on the outer edge. After first taking out the retaining pin it eventually came out



Didn't really know what i was looking for at first... but i got to work cleaning everything as well as i could.
I found that the below-marked drainage holes were completely blocked up and i'm sure that was contributing to build up of crap in the caliper.

Cleaned it all out and then started to inspect the pistons.

Whilst pumping out the pistons(via the rear brake) i noticed that the pot nearest the fluid inlet was coming out a lot faster than the other(nearest the bleed nipple)... is that normal? If not, is that piston likely to be seized?
After that i was fiddling with the slider and read in the haynes manual that the slider should slide "freely." Mine, did not. After much pushing and pulling and head scratching, it popped out and this is what i found...

In the image i'd cleaned the slider up a bit and found those burrs on the pins... is that normal?

Greased up all parts with red silicone grease and reassembled...

Now, when it came back to pushing the pistons back before installing pads... it was VERY hard to do. I had to(using a pieace of wood) sqeeze them back in with everything i had, and even then... it seemed like the rear piston(the one that didn't move as much) wouldn't go all the way back in

Needless to say that i struggled to get the whole thing back onto the disc and bike, but now... even if the one pot is seized, it's still A LOT better than it was.
I can now at least push on the pedal and NOT roll the bike back and forth. Still not as good as i'd like, but it'll do until i can completely redo the brake and replace the disc.
It could still have done with some more cleaning, but it was threatening to rain most of the day and i was suffering with last nights consequences

Other work i did, was to replace a blown temp gauge light(1.7w) and to adjust the preload on the shock to take up plenty of sag. Feels much better now... must have tightened the spring by about 12mm.
Ideally i want to by a new shock with adjustable ride hight... but i need to move and then get my finances in order:)
Thanks again Rick for all your help and advice!
Cheers all!