LGB returned my loco today. They have fixed it by removing the tool box on the tender so that the footplate now has room to lie on top of the tender foot plate, see before and after pictures.
BEFORE
AFTER
Not sure it bears close inspection and I would have thought it would have been easier to reduce the size of the folding footplate, but it now runs round R1 curves no problem. They have reset the decoder which I wasn't expecting but I guess they do that to test it before they return it. It cost me £20 to send it but they paid the return postage, and returned it within 4 weeks.
I am reasonably content with the end result, but given that they ended up modifying the loco, it would have been better if they had acknowledged there was a problem on receipt of my loco, and provided some suggestions on how to modify the loco if desired. That way I would have known it was not a build fault with my particular model, even though I was already pretty sure it wasn't. I might have still asked them to fix it, but I might have decided to fix it myself.
I think the lesson from this is if you can fix it yourself, do it, and in retrospect I wish I had. Lesson learned.