Acting on some sound advice from Sambo I had the diverter valve replaced on my '06 GTI. Got my mate to order one up for me - it's the latest 'D' spec part off the newer TSI engine. He fitted it while servicing the car at the weekend.
Having inspected the old part that came off the car, the rubber diaphragm wasn't actually split (supposedly the main weakness) however with the new part fitted the car is so much nicer to drive. At anything over 4500rpm it pulls much harder and the power doesn't fall off like it used to past 5200rpm.

For the price of the part, this is a very worthwhile mod so thanks for the advice.