Just spoke to Apple Customer Service again on the phone after a failed attempt at the Apple Store due to them being 'unaware' of any type of problem with my type of iPod.
After about 45 mins on the phone and me advising the CS Agent to look further into Apple's reports he finally found an Apple Acknowledgement report stating that there was a large batch of my type of iPod (5th Generation) that would halt any audio output through both headphone jack and docking port. They have noted it down as a manufacturing defect.
So, they have admitted there is a problem and I have just received an e-mail stating I should be receiving a UPS care package to send my iPod off for an Out-of-Warranty repair/exchange. So, after about a month it should be resolved soon, not bad for an iPod with a Warranty that ran out 'over 635 days ago' - I'm just glad they can admit they're not a perfect company