Right.

After having not played the game for a while, I reinstalled it, patched it up to the latest beta patch (3.6.26.5) and restored my backed up user data folder (which I kept as I had unlocked all -- or at least most -- of the in-game options.) Upon the game loading, the first thing it did was erase the file and restore the default teams names and settings.

A bit perturbed, I uninstalled the game & reinstalled, this time using the first patch that allowed Worms: Armageddon to work under XP and reloaded up the game. After confirming the game worked, I restored the files again, but once more game changed the contents of the wg.wgt file and restored the default values.

After some research on the net, I found that this is a default tactic designed for illegal or hacked game copies, but my game is perfectly legal (and one of the original European versions, before any later patched versions were released.) Furthermore, against my better wishes, I have been using the CD in the drive rather than use any no CD workaround for quickness to take that out of the equation. (I dislike being forced to keep any CD in the drive on a personal note.)

Is there any workaround to stop the file erasure?

This is probably a silly question, but you only mentioned restoring your entire User folder. Have you tried simply replacing the wg.wgt file and nothing else?

Yep. Still didn't work.

Very weird. Anyway, it is legal to mount the CD as long as you make the image from a CD which you legally bought.

Just a thought, you could load your old file into TeamED, then save it again to see if that somehow "validates" your file into one that WA will like.
(Keep backups of course).

Sorry to sound newbish, but what's TeamED? Some kind of saved game file editor program I assume?

That's exactly it.
http://www.nanacide.com/wahelp/tpp-teamed.php
No idea if it will save your current data, but if it doesn't you can use this to build a new file near enough the same as your old one.

According to TeamED, my saved game file was corrupted. At the very least, I guess if it did recognise it either, maybe it would explain why WA couldn't load it either. I don't ever remember it corrupting, but if I can get it to work (and unlock full wormage once more) then it's not too much of a great loss in the end.

Thanks for the help guys.

teamED has a feature that unlocks everything and completes all missions with gold status.