If you implement the planning you will be liable for the S106 payment. Once you get the paperwork your solicitor should be able to advise. That is a fair chunk for a replacement dwelling and you may be able to reduce this.
Yes that is a standard condition ("construct according to the submitted plans") and it allows you to apply for changes just with a variation of condition, without them needing to amend or replace the existing consent.
It looks like a bitch of a job. Have you considered just taking up the tiles and fitting LVT flooring? It will feel far less cold underfoot and they do a great range.
With the lack of underfloor insulation - which should be 150mm thick minimum for UFH - you won't get a perfect solution. You may be able to incorporate some radiators for the problem areas.
We have had timber frame fire spread engineering a while ago. Stuart Milne - no longer trading - did the frame and Fire-Q did the fire stuff. It cost about £1000 10 years ago, for a 4 storey terraced housing project about 1200m2. The fire spread risk is mainly during construction. Once it is plasterboarded and finished externally it is far safer. You can mitigate open plan layouts with sprinklers.6293 Fire-Q FSRA Falcon Wharf Rev 02 FINAL 20062016.pdf
Screwfix have a Trade pack of Torx screws on offer at 60% discount.
1400 screws for £19.49.
https://www.screwfix.com/p/turbo-tx-tx-double-countersunk-multi-purpose-screw-trade-pack-1400-pieces/771vv
I think @ToughButterCup is a fan of Torx.
If this is a rental you could just fill the cracks and redecorate. If the roof is letting in water you will need to get it sorted. My mum has a rental in Swindon with subsidence cracks. Five years on and not much progress with the insurers.
You can either rip it out or just leave it. You may be able to leave it for ages without it being an issue. As an interim measure, you could aco round the edges as you don't want any water build up in that corner. You can get cheap stuff at about £12/m and dear stuff at £40/m. Easy to fit.
Is the earth under the joists damp? It needs to be completely dry. Is there any ventilation to outside? Ideally there should be airbricks either side and a crossflow of fresh air. Can you rip out the timber floor, insulation and screed, or is that too disruptive?