This question of a medical came up some while ago in my experience too. A very determined UK guy wanted to get a PPL(H). He had a medical history that prevented him from getting a UK (pre-JAR) medical, but his aviation medcial adviser was able to give him an FAA pass.
He then tried to learn to fly under the FAA system (in the UK). The CAA got wind of it, and they banned him in the way that you indicate. It surpised me at the time, since FAA are full ICAO compliant - it would seem to me to be a bit hard to enforce too.
Heliport:
My point in raising all the flying school caveats was to avoid anyone thinking that you could just walk in and do the same with an FAA PPL as a JAR/UK one. In my experience schools would require more hoops for a junior FAA PPL than a UK equivalent.
You would need to do Air Law to convert to a JAR/UK licence, but it is not a CAA requirement to fly under an FAA licence in the UK. I know that some UK flying schools used to require the UK Air Law exam, cos I ran one of the schools that did. The logic of that was that Air Law in the UK is significantly different from in the USA, and I did not want one of "my" aircraft getting lost in controlled airspace with ATC moaning at me. It involved the pilot being taken through UK Air Law (at no cost) by an instructor and then taking the exam (at no cost). If he/she was not interested enough to take the time, then we were content to do without the business.