Welcome Finance PPI Reclaim Success? I Think Not!

Evening All,
I have been posting my 'grievances' on different threads but don't want to hijack one with my long-winded explanation!
Basically, in March 2008 I cancelled the PPI on my loan. This totalled to £978.63. I was told by the Customer Representative that the full amount had been refunded, my monthly payments would drop to £105.97 and a new credit agreement would be sent out in the post to me. I recieved the new credit agreement and carried on paying £155.95 a month to clear the balance quicker.
The Original Agreement - Total Amount Repayable £5614.20
£2978.63 for Total Amount of Credit (£978.63 for Insurances and £2000.00 Cash Advance)
£2635.57 for Total Charge of Credit (£75.00 Acceptance Fee and £2560.57 for Interest)
The New Agreement - Total Amount Repayable £3814.97
£2000.00 for Total Amount of Credit (£2000.00 Cash Advance)
£1814.97 for Total Charge of Credit (£75.00 Acceptance Fee and £1739.97 for Interest)
In September 2008, I requested a settlement figure from Welcome Finance expecting it to be less than £1000.00 but was mortified when it was still over £2000.00. I queried this as the loan hadn't changed despite the PPI being removed months prior to this. I got a final response letter and was referred to the FOS. I submitted my case in October 2008 querying why the PPI had never been removed and why I still owe more than I should do at that point in the loan.
After being passed around various departments within the FOS, my claim was progressed through the 'mis-sold PPI' route and Welcome Finance agreed to recalculate the loan as if the PPI had never been applied. I thought this was a great victory until this week, when I found out what I was being refunded!
To date, up until I stopped payments in September 2009 as that is when the agreement ran to, I paid a total of £5020.40 which leaves a shortfall of £593.80 owing to Welcome Finance assuming the PPI remains. There is a difference of £1799.23 between the two agreements. If I deduct what I owe to Welcome Finance, that leaves a refund of £1205.43 excluding the 8% interest and £200 compensation.
However, a letter and a cheque from Welcome Finance arrived today for £248.49. The breakdown is as follows:
PPI Refund (premium + interest - rebate) £1296.44
8% Interest £198.95
Total £1495.39
Less Amount Used to Clear Arrears of £1446.90 = £48.49
Compensation for Distress and Inconvenience = £200.00
How do they come to the conclusion that I have arrears of £1495.39? I have calculated all of the 'capitalisation' charges for the 36 monthly loan term and they equate to £3360.78 yet the interest was calculated at the start of the loan as being £2560.57.
This explains £800.21 of the arrears which I can only assume that the remaining £695.18 is in fees such as letters, telephone calls etc. I have spoken to the adjudicator at the FOS about this and my dissatisfaction with the offer but he doesn't seem to want to help.
I have never had a loan before so is it common for a company to calculate the interest at the start of the loan but charge you monthly anyway resulting in a bigger amount to pay off then you initially agreed to?
I'm slowly losing the will to live with this one!
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