When replacing the bottom arm on my year 2000 Octy Tdi I noticed that I could move the strut up approx. 25mm. I did not take the strut out of the car. How much play should there be in the top mounting?

Dunno; Did you check the other side as a comparison?

I wouldn't think 25mm is correct unless you are including some compression of the strut.

Could the strut top bearing be knakkered?

25mm seems alot. Do you notice a knocking noise when driving along bumpy roads?

No vertical movement at all when simply "lifted" by hand.

With the car on its wheels, compare how far each of the top caps sticks up above the wing - one much higher than the other suggests either the top bush has perished or a broken spring.

The top rubber is probably shot. Took a strut out of older scrapped OCTY to see how to install a replacement rubber.....but it looks like I need spring compressors as the assy has to be taken apart to fit the new top rubber part. Not sure about the bearing part.

They do compress over time and give a little movement. However unless your wheels left the ground you wouldnt feel it up the road, and by this time a knocking would the least of your worries.

Also not technically an MOT fail.