Just as an aside, I have now replaced the spindle cable with shielded 4 core and hooked up the earth. As suggested I have gone with a star ground and I've just finished the first job after putting it all back together... Machine behaved impeccably.
So a bit early to call it a success but early signs are indeed positive, and now my machine won't electrocute me if the spindle or wiring develops a fault and the VFD is wired as per Nowforever's instructions.
I do still need to fully isolate the psu and emi filter from the case, so that the earth wires are the only return path... It is however working fine at the moment as is.