My main issue is that I want to give clients full Author access to their individual WP accounts while I maintain control over the domain names I purchased for them - in addition I don't want any of the penalising from search engines that might go with domain pointing / frames etc. etc.
In that case, I recommend creating a network as esmi mentioned, and use this plugin to handle the domains:
Do you recommend a fast, cheap hoster in the UK that allows manual configuration (not 1-Click apps)? (Assuming DNS config for this is straightforward from the domain provider I'm with and again, doesn't cause problems with search engines.)
Almost all hosting providers support installing WordPress manually. In fact, I can't think of any that don't. Most 1-click installers are simply an option, not a requirement. As for UK-based host recommendations, I've only used US-based hosts, but searching via Google should turn up some helpful reviews.