Thanks for the info guys!!
Yesterday I ran a compression test with some interseting results. Here's what happened...
1. Removed all spark plugs and discovered 2 - 3 inches worth of water in plug hole #2.
2. After removing the water from #2 I ran a compression test on all four cylinders with the following results:
#1 = 154 PSI
#2 = 160 PSI
#3 = 157 PSI
#4 = 160 PSI
(Note: the engine had cooled down a little inbetween idling and actually running the test. This may account for lower pressures.)
This I did not expect - for a head gasket fault I would have thought constant pressures across all cylinders would be a sign that the gasket was ok. Maybe its water in the petrol!?!?! According to the chart on the back of the testing kit all the pressures were well within the green - anything up to a 15 PSI difference is ok.
After the test I changed the plugs and let the car idle for a good 10 minutes. During this time the engine ran silky smooth with no signs of backfiring. I then applied some throttle and it seemed to run smooth at 3 - 4000 rpms.
Feeling confident I took the car out for a quick spin. After only getting about 200 yards down the road the missfiring began again - so I limped back home.
At the moment I am struggling to figure out what the problem is. I still suspect head gasket as I cannot explain why there was water in plug #2 and that plumes of moisture had been seen coming out of the exhaust. The oil in the sump looks ok and there's no crap under the filler cap. The only thing I can think to do next is change the rest of the ignition system (dizzy, rotor, leads) too see if it's an electrical fault.