Thanks for replying 
Grateful for the useful info, from what you have said I have found that the timers on the L2Circuit are 10 second keepalives with 30 second hold timers. Given the brief nature of the flaps that explains why the l2c connections command is not detecting the LSP drops.
From what you said regarding traffic still being forwarded via the LDP labels, I take it then that if we see ospf flaps associated to BFD over this L2circuit, it could only be because the BFD packets happened to be on the flapping link (between LSRs) at the time it dropped?