I think my freehub is dragging, attempting to freewheel leads to lots of chain slack, but it does just about work – back peddling (just to see) was a total failure. Is there any way to service this item or is it a £37 replacement (+£5 for a 14mm allen key)?
Is it worth £40 on a 4 year old wheel?

No. Sounds like M775 have had many problems. Shame I liked mine when they were working, but those times were few and the bike shop didn’t like working on them (not so user friendly to service those hubs). Sadly I would bite the built and get something else.