Hi Nomad9,
I have just come back from Robe SA where a did a lot of sand driving (forst time on sand in a D3 as well. I did find that using command shift worked very well. 3rd gear low was perfect for nearly every boggy bit and only used 2nd once.
I did not touch the DSC at all and found it didn't hinder the vehicle at all. I run 18's and found 16psi to be ideal. I have the 2005 V8 and it is fantastic, i love it even more after sand driving...its awsome. Mine looks almost identical to yours.
Here is a quick link of dune driving...
YouTube- Land Rover Discovery Dune Race 2010
(Mine is closet to camera)
 
so, all i can say is you can have the best 4x4 in the world (and do) but sometime just have a bad stretch of sand and luck...
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