Further to my post last week, it seems the mark as unread function is now working again, but only if using the mouse (right click > mark as unread).
If you use the Gmail keyboard shortcut (Shift + U), visually the conversation still looks "read" - i.e. doesn't go bold, blue fot etc. However the status does seem to update - if you use the shortcut and then right click to mark as unread, the option is actually Mark as read.
Hopefully this makes sense.