Hiya Diggs
To be honest, as you must be on one of the last Artificers courses running, it's not all that surprising you have been turned down for manning clearance. When Artificers joined the RN straight in as Artificers unlike everyone else who had a 2.5 years return of service on completion of training, Tiffs had a 3.5 year return of service (as did Naval Nurses) due to the cost of training.
The 4 year Tiff course cost the mob a huge amount (around £600K was often quoted) per trained head & frequently the young Artificers on their first sea draft would see the life that the Marine Engineers enjoyed & tried to transfer, rather than return to the classroom. They were usually knocked-back.
To get on one of the last Artificer courses must have been quite competitive and a much sought after training place so it's rather easy to see why the Branch Manager would be a bit miffed that one of the precious places taken is held by a person that wants to opt out and be a Royal Marine after (I hope) being told of the return of service from the outset. If you view it from the Navy's point of view, you've been paid a wage since 2005 and have probably been in an untrained or TPS billet throughout (Training Performance Standard) that period so they will want their pound of flesh off you in a OPS billet, actually doing a job which you have been trained to perform. For as long as you are deemed untrained, you technically "belong" to Raleigh or CTC.
Failing exams is most definitely not to be advised as I'm sure you're aware as it will result in you not being recommended for further service, Discharged Unsuitable During Training (DUDT), particularly as it'll be the second, rather expensive training course you will have not completed.
A representation whilst an entitlement, is highly unlikely to find in your favour unless you can categorically prove you were not made aware of the terms and conditions of service when you transferred to a new contract,having effectively already submitted PVR with the Royal Marines in the last 4 weeks you were able to. When you rejoined, you would have been advised that you sign your Attestation Form to state there is no possibility of changing branches, you no longer have the right of discharge (PVR) and must complete your full SITP (4yrs), then 3.5yrs return of service, before being eligible to submit 12 months notice to leave.
I think Pompey AFCO has probably given you pretty sound and unbiased advice as it's unlikely you will get recommended further service without a Caveat attached barring re-entry for up to as much as 24 months in some cases. The advice from me is definitely don't burn your bridges if you have to leave as it will definitely bite back with regard re-employability. If you were to leave then re-apply, from an AFCO perspective, you could be refused re-entry as you will undoubtedly be viewed as an extremely high training risk & you will need to do a lot of convincing to be considered suitable for a 3rd attempt under training.
Given your Family circumstances, the drafting stability whilst on course in Sultan for the next 1.5 years further TPS & the transferable qualifications after completing training, I'd be inclined to try and make the system work for you rather than fight it. It's got to be worth investigating the possibility of working in support of 3 Commando Bde in Afghanistan in the Marine Engineering capacity as they are using ME's to augment the shortfall of VM's. With an understanding boss, the possibly of becoming a Royal Navy Commando via AACC has to be the best option, rather than leaving altogether and once All Arms Trained, possibly looking at transferring to RM VM if there's still a shortage (or possibly attempting selection for one of the more exalted specialisations).
Best of luck fella- hope it works out as you would wish.