My quest for a smaller (or folding) bike with drop bars is over at last. After much online research I placed an order for a Dahon Hammerhead 7.0 (2006 model). The 7.0 is in my opinion a great bike with good specifications, and the 2006 model has the front suspension, which was removed in later versions of the bike, and I prefer a bit of suspension on an aluminium frame bike that is lacking the flex of the steel frame.
The price? £245 - down from £799, which I think is a great deal. They are also selling the Hammerhead 5.0 (2006 model), this is the one with flat bars, for £199 - reduced from £479.
Here is a link to the 2006 Hammerhead page on Dahon's website
I just felt like I should pass this on, as we in the United Kingdom often seem to be starved of good deals, paying far more for things that are cheaper in continental Europe and the US. I bought the bike from Winstanleys Bikes. These bikes are currently in the clearance section under "Folders". I hope it is OK under forum rules to pass this info on.
I think the Hammerhead 7.0 is a great bike, and a worthy compromise to the bike I initially had considered, namely the Pashley Moulton TSR30. But at over £1350 I simply could not justify spending so much many on a bicycle. The only thing I would have wished for is that Dahon would produce their really neat smaller bikes (the Hammerhead and the Smooth Hound) in steel. I was reassured however to learn that Dahon offer a 5 year warranty on such things as the frame, which is upgradable to lifetime warranty when you register online at their website.
I will post some pictures of the bike once it has been delivered. I cannot wait to take it for a spin around the cycletrack of Hyde Park!