OK, lots of attempts got nowhere with this.
Finally, turning off fire-walls on the router, again, and it works.
This just highlights yet another reason DHCPv6 is wrong!
PPP is not subject to firewall rules!
We also have highlighted in the testing that DHCPv6 does prefix delegation with timings and not attached to the life of the PPP session (or at least till the next session starts). Another brokenness with using DHCPv6 rather than PPP IPV6CP...
P.S. Interesting - someone else using DHCPv6 (on linux) also hitting fire-walling rules meaning it did not work... Fundamental flaw here I think.
P.P.S Apparently DHCPv6 is not enough for the 877W - it does not set the gateway. It looks scarily like we may have to do RA as well. We'll test. Thankfully the consumer routers we have been looking at don't seem to need that. Extra mad.