I've tried lots of things now including replacing both passive rigids with non-rendered planes (if nothing else, this helped to get a clearer view of what's going on and rule out geometry issues)

It's not perfect yet, but what seems to have helped the most is in the rigidShape attribute box there's an option to display the collsion thickness. By tweaking the collison thickness for each object and moving the objects different distances apart I am finding that the ncloth is now coliding with both rigids.

I think ncloth doesn't much like being squashed between two rigids like this, but hopefully I can make it work now.

Thanks for your posts : )