The situation with the British passport office is that they do not agree with one person having passports from different countries with different names. They won't move from this position.
You need to either 1. Get a new passport from the Thai embassy in London, or 2. Go to Thailand to get a new passport. The choice is yours. Perhaps your next step might be visiting the Thai embassy.
In terms of taking your passport, the British government view it a different way. Passports are the property of the government, not the property of the individual citizen. A passport can be retained or even cancelled should the government believe it has a good reason to do so.