I have experiance of both applying for CAA exemptions and being in the back of a Spit, in general the CAA have always been helpfull re display lines, heights, speeds etc. If they are not happy with something I have allways had a phone call and usually possible alternatives are discussed - I too believe that there must of been some immovable object regarding this application.
Spits do glide, not very well however the drag of say a stopped 4 blade prop has to be felt to understand why the CAA are VERY cautious over the "land clear" of congested areas with such aircraft. Even aircraft based and maintained at Duxford have problems and remember Duxford do not maintain Merlins - they can go clunk at any time - have had experiance of that - it is not a nice feeling watching your friend deal with such a problem. Imagine the headlines at Nuneaton - "65 year old plane in death plunge - just misses school and women pushing pram". Never say it can't happen.
re the BBMF over London, I have a vague memory of one pilot telling me that they were told at the 1st sign of any "problems" they were to ditch in the Thames as its the ONLY place to go, effectivily a death sentrance to the pilot, on no account try to put down in a park, road etc, the belief being that the £costs for death\damage and resulting publicity would be horrendus. Dont forget even the BBMF planes come down, not often but it would only take the one.
No more guess work, but it would be intresting to see what was applied for and what the ultimate reason for refusal was.