Well a little journey there but success it seems in the end. Thanks for the recommendation privateye.Give SSP v1.95 a try, it's included with the Wachenröder entry in the Sega Saturn 27th Anniversary Game Competition:
Attempt 1 - patching the translated SF3 scenario 1 disk with the difficulty patch. 1.95 completed successfully... only the BIN file was significantly smaller than expected so 99% of data had been lost.
Attempt 2 - apply the difficulty patch to my original iso image of the disk (made with magiciso iirc) and was essentially untouched. 1.95 tries but then crashes.
Attempt 3 - apply the difficulty patch to the same iso image now mounted (via elby clonedrive) as a virtual drive. This is the version that succeeded and left me with patched BIN/CUE files that the translation patcher could patch with.
For the record I tried to recreate attempt 3 with v1.91 of the patcher but that also crashed the patcher. I'm not sure if the above is helpful to anyone but I thought it worth documenting.
KnightOfDragon I continue to be super impressed with your skills, many thanks.