Yes I think that is what my issue is.

There is a fix but it requires a competent person opening the headlight unit up.
I think there is a write up somewhere, I believe the wires are either too short or cable-tied in a place that reduces the slack.

A new headlight will obviously have the same issue but I suppose at least it would work for a few years before fracturing through use..

That's exactly the problem. I had considered replacing the cable tie on my good one, so that there is a bit more slack in the wire. As for the other one, I'd thought of repairing the wiring, but it depends if you could get the connector and wiring out far enough to work on it, without having to take the headlight apart.

Could be taught cables... Although with the same symptoms on mine, it was the headlight control module.

So my gremlins have returned with a vengeance, the entire car cut out for a micro second, lost all power whilst on the M40! I properly sh1t myself!

That is bloody dangerous and not sure really what to do now.

I got home but the electrics are all over the place, central locking, interior & exterior lights, startup sequence, needle sweep, all glitchy. I am thinking either loom damage somewhere or water somewhere.

Where are the drains located again?

Possibly a stupid suggestion, since I know nothing about D3s, but could a bad main earthing point be the cause?

Actually I think you might be on to something. I wonder if there is a test for that?

Battery terminals ok? I had a D2 do something similar when the positive terminal was loose. That blew up the alternator though.

How about that bolted terminal in the footwell that's problematic? Does it have a main power cable feeding in to the electrics box in the passenger side like D2s do?

I'm not sure how you would test for a bad earth. The modules likely wouldn't be able to detect it since they would power down for a moment. There should be a main earth from the battery negative, but I'm not sure how thats done in the D3 with the battery module.

I'd also be searching for the main harness earthing points which are usually under the dash on the A pillars.

It does have a hint of 'nibbled' wiring harness though too.

Very odd.

Could the oil leak have caused some damage to the alternator?

I've seen electrical gremlins manifest themselves through a voltage spike coming from a faulty alternator - a generic OBD reader with the ability to track voltage should be able to map what the alternator is doing.
Plug it in and take the car for a good drive and review the results.

A good clean up of heavy pos and neg terminals would also be a cheap fix if it cures the problem.

Leaking battery - I took the battery out and everything underneath is covered in a light film of battery juice, lots of yellowing and corrosion. The corner of the boot closest to the battery was dampish. The outside of the battery was wet.

Please see photos. Any ideas what those modules are? I have disconnected and checked, visually they look ok.

Do we think I have found the culprit?

I hope this is going to be ok.

Wow, never seen that before. I would put sodium bicarbonate all over it to neutralise it. Does the battery have that 5mm hole in the end that that pipe plugs into like the original? Did it come out?
Do you think it boiled up or is it cracked?