I think "sleepwalking" is an understatement. Many non EU licenced pilots are already flying Third Country Registered aircraft illegally in Europe because not all States applied for the derogations as far forward to April 2014.
However its fair to say that many don't really understand the FCL aspects of the "Basic Regulation" (EU216/2008) and even the UK CAA's advise on the matter, as per the above link, is lacking in material content.
My understanding is that, further to legislation adopted in 2011, pilots require both the relevant FAA and EASA licences to fly private, N registered, Europe based aircraft.
The legislation came into effect in April 2012. In respect of FCL it has nothing whatsoever to do with where an aircraft is "based," and the term "based" is not even mentioned in the legislative text. (Quite why the UK CAA refer to an aircraft's "base" is a mystery to me).
Most European countries exercised a derogation that effectively postponed this to April 2014.
Certainly not the case. Some did postpone some parts of the legislation by applying for derogations, but one would need to check carefully which derogartions apply and which specific parts (Parts) of the legislation they relate to. Part FCL is only a fraction of it.
Is there a chance of a last minute ‘deal’ to keep all the N registered bizjets flying?
Only if the legislation is repealed. It is already the law. It came into force on 8th April 2012.
Does migrating onto the IOM register, or any other, improve the outlook?
For whom? I presume you refer to Part FCL and mean crew members who do not possess EU licences, but wish to fly M (or any other non European State registered) aircraft. Possibly, but the text of the legislation is quite clear, and it depends where the operator of the aircraft is resident. If the operator of a Third Country Registered aircraft, be it M, N or any other non EU register, is resident outside of the EU, then there is no requirement for the crew to have EU licences. It has nothing whatsoever to do with where the crew members reside, or even come from. N registered aircraft operated in the USA and flown by FAA licenced crew members will be unaffected, so too will M registered aircraft provided that the operator is not resident in the EU.
Is there a belief that the rule is not going to be enforced? Where does that leave you with regard to insurance?
I think a lot of operators should be asking themselves the same question