OMG I FIXED IT
As usual the problem was at my end.
So I figured out if you exclude the palette name from showing in the Vignette strip then the palette will not disappear once a tool is selected if you launched the palette with a shortcut key. If I select 'icon' or 'abbreviation' when setting up the favourite then the palette acts as expected and disappears once the tool is picked.
I am not sure if this is a deliberate function or an oversite. The reason I removed them from showing in the Vignette strip was to reduce clutter when moussing across for other pallets, I have them as shortcuts which I have mapped to the space mouse so I click on one of those keys when I need the palette. My work around is to assign a single letter to the abbreviation and position them at the end of the vignette strip.
I feel like a bit of a muppet for not making the connection sooner. There is nothing like beating your head against a brick wall to induce a bit of clarity!!
Thank you for your efforts in resolving this.
Mike