I feel for you, Si. I've had my problems with DSS in the past too and the red tape and the hoops you have to jump through can get to be too much.
I was a volunteer advisor for the Citizens Advice Bureau whilst trying to find a job. Part of my job there, as you can imagine, was helping people to fill out the many DSS and other benefit forms etc.
Guess what. The DSS told me that I could no longer volunteer for the CAB because it meant I was not available for work whilst I was there. It no way interfered with my job searches and interviews because it was only a few hours a week. I was helping the community with something that, to my mind, should be government funded in the first place, but I had to give it up because of "The Rules".
Your case simply underlines why many people are not strictly honest with the DSS. Those that are get penalised.
My advice, for what it's worth, is to do the minimum required to qualify for what you need, take all the cr*p they throw at you, and when you've got what you need, take it, give 'em the finger if you like, and never look back.
I wish you luck m8.