Well, after a lot of messing around with various settings in the back office of the test site, I cleared the cache from the Faceted search module and unbelievably customer logins started working again, even registrations were working!!. I re-applied permissions to the folders again to see if that would help editing the products without throwing the "unable to update settings" error but all that happened is the site crashed out. Not sure if it was something to do with reapplying the permissions or not, but I left the perms as they were and just restored the old site and dbase back to the test site and did the upgrade again, went through all the steps above again and this time I could edit the products and with a bit of fumbling managed to get the customer logins working again, so the test site was now completely up and running!!!
Thinking all was well, I went ahead and upgraded the main site and again went through all the steps above, however no matter what I did I just couldn't get customer logins or registrations to work again, nor can I now edit any products that has combinations so I'm literally at the point now where I probably have to admit defeat. The upgrade just isn't going to work as smoothly as it should so the only option for us is to probably create another "test" site and perform a clean install of 1.7.xx and try to just recreate everything. I'll try migrating customer data across at the bare minimum but I reckon it will be easier in the long run to just manually re-create all the other data, cats, products, etc, and if the customer migration doesn't go well I'm likely looking at having to rely on previous customers re-registering.
Never would I have believed that "upgrading" prestashop would be as difficult, tiring or as ridiculous as this and having spent the last week searching for answers on this forums it's clear there is a huge issue for many trying to get from 1.6 => 1.7 and for many it appears they have given up and moved on to other platforms out of sheer frustration which is a shame, because Prestashop is a fine platform which is let down by what appears to be a lack of concise support in matters like this. All respect to those who are here and try their best, but given the amount of threads which are left unsolved and fragmented it's like walking through treacle trying to find the answers.