Thanks for the replies. In hind sight yes we should have declined the traffic service and requested a Deconfliction service instead, it certainly would have been our preferred option. It is correct to say that in most cases ATC ask what service is requested upon first contact to which the answer is always a Deconfliction service please. I suspect that this is a case of proverbial environmental capture in that I am used to being offered a service rather than simply being given one and for this reason didn't ask. I think that a Deconfliction service probably wasn't available regardless though due to the high traffic density in the proximity of my destination. Multiple military targets and at least one training aircraft in the hold above the field from what I could hear. In the defence of ATC he did explain these issues to me (albeit not an excuse for putting us on a collision course under our own separation in IMC) and in a round about way vectored towards a visual approach clear of cloud.
I guess I just wanted to know how ATC are directed to deal with IFR traffic in IMC under a Traffic service, technically the pilot is responsible for collision/terrain avoidance yet can't possibly do so in IMC (albeit above MSA) and ATC are seemingly powerless to override this authority if the pilot chooses to vector him/herself.