I also think the pipe going through the ceiling of the alcove looks strange. In fact, to me it looks like it six inches at the pipe and then it looks like it connects to some sort of adapter making it larger. It reminds me of a thimble on my basement stove that goes from 6" to a thimble that adapts it to a larger circular clay tile piece that goes into the side of my clay tile flue.
Well, the above post pretty much sums it up.
After all your very helpful advice and possible solutions, I was able to do some more research into the installation and have found the reason for the problem.
There is no flexible steel lining within the flue system. What the installer has used is a rather simple and nasty flue adaptor that sits within the 8 inch terracotta flue. This is obviously not sealed properly and any moisture is leaking out. As the chimney is a larger diameter than the stove pipe, the chimney system is over-rated. This is probably the source of all the moisture due to condensation?
I found a very helpful local company that really know their stuff. They were able to advise me over the phone. They're going to carry out an inspection of the stove installer's work and advise of what further work needs done to make it work as it should. This will probably involve installing a 6 inch steel flue and insulating it within our existing chimney.
Our builder confirmed this when I spoke to him the other day. He pretty much said he didn't know the steel flue was needed and that the stove installer hadn't pushed to install one. I'm guessing they've both taken the cheapest route and hoped it would work fine.
My main grievance is that I've spoken to the stove installer a couple of times over the past few weeks and he's continued to insist it was wet wood and it would stop after a while. Not once has he mentioned about the steel flue liner. Either he's been trying to fob me off or he really is just a cowboy installer who knows very little about his profession. One thing is for sure, he won't be carrying out the steel flue install as I think he's seriously incompetent and I wouldn't want him in my house ever again.
Once the inspection is carried out, I'll present the report and quote for the further work to the builder and push that he contribute to paying for the work.
I just have the small issue of the £600 I owe the installer for extras (the granite hearth and stone back wall). I'm not sure where I stand as these are now stained from the dripping but I'll worry about that later.
Here is a link to a PDF I found really helpful the other day: (broken link removed to http://cdsf.co.uk/wp-content/uploads/2012/12/flex-lining-explained.pdf) . This is the company I mentioned earlier who are carrying out the inspection. Page 2 shows what I guessed was the problem I was having. According to that PDF,
'Building Regulations in Northern Ireland state it is necessary to reduce the diameter of the flue to suit the appliance you are fitting, as over sized flues can be unsafe.' This is something I'll need to find out in more depth to see where I stand in regards to paying for any further flue work.
I'll update again after the inspection when I've a proper professional report.
Thanks again,
Ryan