Sorry to hear it's not working out for you.
Those £300 sites you keep getting offered, sometimes you can't afford to turn them down in the early days. Sure it's not much money but one trick is to start out with a few "cheapies" then gradually start bumping up your prices by £50 or £100 per site. The idea is that the more you do the more word of mouth will bring you in more enquiries. After 6 or 7 sites and a bit of luck that £300 might have turned into £600. Of course you won't be building the next Amazon for that sort of money but for sites that you can put togteher in a reasonable amount of time it's wotrth a go.
And wacking out crap sites, bite the bullet my man! I've built up a ton of naff looking sites that have been "designed" by someone else, all I do is code them up (all valid code of course) and hand them over for whatever budget is being offered. Sure I'd never put them in my portfolio but if you do a good job the chances are the original designer may come back for more. The point is that it's regular work no matter how shoddy the site may look if you know you've coded it up well who cares? That's really between the designer and his client.
At the end of the day it is very hard to get a foothold. As you say there's a lot of competition from overseas for the cheaper end of the market. Alas that's just how it is.
Of course there's nothing stopping you doing web stuff part time and finding another part time job to fill in the gaps?