My thoughts are that it's because the stats only have two wires going
to them so the stat is only switching the live feed to the motorised
valve. There is no neutral wire to actually make the thermostat itself
work "properly". (not sure how to explain this technically)


Yes that's right.
When a bi-metal strip type room thermostat closes it applies mains
voltage across a small resister in close proximity to the strip.
Its called the pre-heater.
The idea is to make the thermostat switch off a little earlier than
it would otherwise do.
In technical terms it reduces the hysteresis of the feedback system.
http://en.wikipedia.org/wiki/Hysteresis
As there is no neutral to complete the circuit it doesn't work.

My advice is dump it and go digital.
--

Graham.
%Profound_observation%