I wonder why the Passport Office and the DWP can cope with foreign addresses but the DVLA cannot? Not allowing someone to change their address because they moved abroad just seems to encourage misbehaviour.

It isn’t a question of them not coping. See my post above.

The opposite in fact - it’s to stop you from holding multiple licences as a way of avoiding penalties and disqualification.

I did as you suggested,Midsomer Peter,and went to the central ACI office here in Rome,where they also have a doctor,(on Fridays for a couple hours),at hand for the medical. The only sticking point for me was not having a carta d'indentita,(I thought my passport would suffice), but after some persuasion they accepted my attestazione di soggiorno permanente. Also 3 photos were required. They told me it should be ready to collect at the end of next week -can't believe how quick and straightforward the whole process was! Thank you for all your helpful advice -I'd just about given up on the whole thing.

The last person I know who had a similar problem to you was able to exchange their DL, but the new DL was issued with a note saying that the motorizione reserved the right to order a test within the next three months. I dont think the she heard anything back after that so * fingers crossed *.

I'm pleased to be of help, and it's great you took the time to say you were successful.
Presumably they gave you an A4 sheet of paper for you to carry in your car in case you get stopped by the police.
Just a note of caution - don't be too disappointed if what you collect in a week's time is a stamped and signed version of the piece of paper they already gave you!
I'd expect it to take a few weeks longer before your actual licence is ready.