Mizz - sorry to hear this tale of woe. Hope you get sorted. Your method sounds fine to me.
Yirg - some of the comments on this thread are unbelievable. I've got 50 plus BIAB brews done and only one lost. This was due to me screwing up the temps.
I also use Campden.
God bless you Aussies...
Hi - this all sounds ok.
I mash out at 80c.
I don't think cubing with air in is an issue as long as you get all surfaces covered by the near boiling wort.
I can't comment on the water - this may be where the problem lies.
I use an urn for BIAB - I get the mash temp up to about 67c then switch the power off. Mash for 45 mins with a quilt round it - stir half way and mash for another 45 mins. I generally lose about 3 degrees using this method. Then I sparge with 75c water. Luckily I have access to another urn...