Ok, so after some time I think I have it a bit more figured out, although the behaviour is not perfectly understood from reading the manual.
Processing output folder in preferences should be set to the PT session being worked on.
- Spotting to the session from Audio Finder will copy the file to the Audio Files folder.
Dragging and Dropping will do the same - even if the 'processing output folder is different in preferences.
Of course being careful not to be making copies into a previous sessions Audio Files folder - new habit of changing Processing output folder with opening a new session.
Thanks for your replies guys.