Well it's interesting.... (and it's been a long day!)
So the user was banned by the internal warnings system..(point accumulation). and was showing up with a line through them. However as part of a promotion, they were a member of another user group as a secondary. so whilst it shows them with a line through, it doesnt actually clearly show them as "banned" as such (No text or something to make it clear).
I modified as per your suggestion ("Banned" usergroup already exists, but needed to add the "Add usergroup on ban"), however it's done nothing... i am guessing that it needs something to run to reflect this? Have rebuilt the user Cache, however no change.
also interesting to note - just thrown Andy's add-on in, and that does nothing either ... so convinced something needs to happen to Update the user status...