Congratulations on being one of the very few posters who has actually done some research before asking their question!
Your thoughts are correct. If you can gain a Class 2 medical and pass an LST on a single-piston then you'll have a useable licence again (after paying the CAA more money). It will need converting to an EASA PPL in 2012 (or later depending on the exact transition arrangements) assuming you want to fly PA28s, C152s etc rather than Chipmunks or Tiger Moths. The process has not yet been published but I'd expect that you'd have to perjure yourself by signing a piece of paper saying you've read and you understand EASA Part-FCL - some have done the former but no one I know has done the latter. You'll need to pay more money as well, but the good news is that EASA licences will probably be non-expiring.
If you want to go down the NPPL route then you'll need to get an SSEA rating and GP certification. Again, there'll be a conversion process to an EASA LPL which should involve the same sort of stuff although I believe that the EASA medical requirements will be slightly different.