Thank you everyone... it's comforting to hear your good wishes.
Pepper did come with 12 weeks free insurance from the breeder but there is a 14 day cool off period attached to it, and his problem started on day 13 of this period. I've begged and pleaded with them that for the sake of 4 hours they might consider the claim, and they're sending me a form to fill in and 'they'll assess it', but I fear this may have been a tactic to get me off the phone.
Anyone getting a new pup, check this out. The vet says this is fairly normal, although there are a couple of companies who do start insuring right from the word go.
I called the breeder soon as it happened, and although she was very sympathetic, made no offer of financial help. I wasn't quite sure whether to expect it or not, but so many of you have mentioned it, it's something I think I will broach. I'm going to wait until I hear what the prognosis is today and approach it later on.
I'll update when I have news from the vets... thanks so much everyone.