am inclined to make a general comment about the technical knowledge of builders but can not obviously put them all in the same category; you seem to have got a couple of cowboys.
water repellent over all the brickwork is extremely unlikely to work at the best of times, remember in principle that you will need your walls to let water out as well as in. the problem as you describe it surely lies with the fill/mastic put in to the window jambs and/or how any cavity fill is helping water to track inwards. what often happens when dg is installed is that any damp proof courses at the jambs are cut away or damaged. it is likely that you will have to remove the windows to establish what is actually going on, there are rarely easy solutions to such problems. However, while you do not say what you frames are one solution might be to install a new void externally at the frame to wall junction. the idea of this is to provide a gap across which water can not track or be blown by high winds and could probably be made up quite simply out of a timber batten fixed to the brickwork and then lead or zinc (i like metiflash as its more workable than ordinary zinc) dressed over the batten and into the frame. Needs a detail really and knowledge of the actual existing situation. Happy to advise by phone 01424 752311. I would also suggest you give some thought to providing good drip bars fully across the heads of all windows, but again needs a detail.

Thanks for the info guys - you've convinced me that water repellent sealent is not a good idea !

FYI - The walls are brick, of a kind that appears to be very porous. As my house is on a hill at the end of a valley in South Wales I have no protection from high winds and heavy rain. The problem, I believe, is not so much leakage at the window frames (upvc) themselves but damage caused when they were fitted affecting the drainage of water that gets in the cavity. This has probably been made worse by cavity filling.

Unfortunately, as Ken suggests, I think the windows may have to come out to see what's happening and repair the damage.

I'm currently looking for a reputable local builder through the FMB.

You're right, yyeuk - that's what comes of buying old council houses ! Looking at other houses nearby I think a job lot of double glazing was done years ago on the back of council grants.

Overcladding is a possibility, in fact the 'design' is such that one third of the front already has tile cladding - I don't have a problem with damp on that bit.