LMJM: don't loose heart I have a HUGE folder full of my unsucessful applications and rejection letters, almost every one I know has a similar one apart from one guy but his dad's a judge

The problem is no one really knows what the law firms are looking (I sometimes doubt they know themselves), I have seen absolute muppets get traineeships over people I thought were were switched on cookies.
The best advice I can give you is keep going, its just a matter of waiting till you find a firm where you fit in. A lot of the problem is that all your contempories have similar CVs (i.e. good grades, gap year in europe/africe/asia, on track for 2/1, duke of edinburgh etc) and at the end of the day it really comes down to personality.
I note from your post that you have a "sparking CV" and "good application technique", even so it may be worth getting your uni's careers service to look over these, a second opinion and maybe some minor pointers may be of some use, some law firms even offer a clinic to help with applications although i think that was in the dipoma.
Also think about what sort of law you want to do at the end of the day, I flunked an interview at an edinburgh niche property firm as they managed to work out that I had no interest whatsoever in commecial property. If you really want to do criminal work or general chambers work there is no real point applying to megafirm LLP as they will be able to work out you ahve no interest in drafting PFI agreements, you would be better off writing to local small firms asking about traineeships/work experience/shadowing etc.
Getting a traineeship/Diploma place is getting more difficult as there are now many more llb providers, the Diploma will really hinge upon your core marks and if these are not good you may wish to think about applying tactically (I do not know where you are studying) to Aberdeen or Robert Gordon, the former becasue they greatly expanded their diploma in 2006/7 to take on a lot of waifs an strays from elsewhere and the latter as their diploma is 2 years old and rapidly expanded from 15 folk odd to over 50 in its second.
Hope some of this helps, N-M