Re Q5:
A V5 ('log book') records the registered keeper of a vehicle, not the owner of it. DVLA do not keep records of who actually owns a vehicle, and they have no interest in such matters. Millions of vehicles, for example, are 'company cars' which are registered to the driver's address - so that he'll receive any speeding tickets, etc - but are actually owned by his employer or a leasing company. DVLA will have no knowledge that such vehicles are 'company cars' or of the financial arrangements relating to them. Similarly they have no knowledge whatsoever of whether a car was bought for cash or 'on finance'.
Re Q1:
Repossessing vehicles is not a 'licensable activity' for SIA purposes:
http://www.sia.homeoffice.gov.uk/Pages/licensing-activities.aspx
Re Q2:
Buying a car in good faith (from someone who had no right to sell it) gives you no more rights than, say, if you'd bought stolen goods in good faith. The goods/car still belong to the original owner. All you can do is to take civil court action for compensation.
Re Q's 3 & 4:
I've repossessed hundreds of vehicles (as a 'trade plater') but always from the person who'd defaulted on the finance, rather than from a third party. There were certainly no court orders involved in the process then and I doubt that they'd be required (in the first instance) in your circumstances. However, since you've refused to hand over the vehicle, a court order could now be sought which would force you to give it up (or face criminal prosecution for failing to comply with a court order).