Thanks both - I did a lot of testing and sovled it, but the behaviour is quite (IMHO) bizarre.
The unchaptered conversion had
Roman numerals for the chapters
.
Despite layout being:
Chapter XII
(note the gap), Calibre still wouldn't recognise it as a chapter break. Once I converted to arabic numerals (identical spacing) the chaptering went without a hitch.
I wonder if Kovid realizes this oddity in behaviour, and if so whether a bug report is worth making....
.