Following the trail right back to its starting point:
s115(1) – no person entitled to a range of benefits, including HB and CTB, if s115 applies to him/her
s115(3) – s115 applies to a person subject to immigration control, as defined in s115(9) and including those with no recourse to public funds, unless they belong to a prescribed exempt group
2000 Regs: Reg 2(1) – for means-tested benefit purposes, s115 does not apply to people listed in Part I of the Schedule
Part I of Schedule: para 1 – a person with no recourse who is temporarily without funds and has a reasonable expectation of funds resuming
The Schedule seems to me to be written very much in the present tense: s115 does not apply at the time when those conditions are met – after those conditions cease to apply, s115 applies once more.
Finally, HB Reg 10 says that para 1 of the Schedule can only apply for a maximum of 42 days for HB purposes. The way I read it this restricts the HB exemption to a cumulative period of 42 days during which funds are currently interrupted.
In summary: Para 1 of the Schedule to the 2000 Regs disapplies s115 during any period of interruption, but not at any other time; and HB Reg 10 caps the period for which that para can apply at 42 days.
I see no ambiguity and I think the Tribunal has got it wrong. I believe you have a strong case for going to the Commissioners.