If you intend staying in Spain for more than 6 months then you will automatically be considered a resident. If you are coming to Spain to be a resident then you have 30 days to start the process of changing your car's registration.
I know personally many people who do not bother and get away with it.
Spanish insurers will not insure a car with uk plates. You can get uk plated cars insured in Gibraltar.
Saga and Ecarinsurance are the only UK cos. I know of who give unlimited European use (as long as you main residence is in UK)
Being in Spain for more than 6 months has lots of other complications including tax and NHS considerations.

Thanks for the reply brodev.

My intention is to try long-term before finally committing myself to a permanent move. If I returned to the UK midway during the 11 months (for a fortnights holiday :)) would that be classed as two seperate periods?

I'll certainly take a look at the two insurance Cos. if I go ahead with the idea of bringing the car and I'd be very interested in hearing what I should look out for regarding tax, NHS and anything else that may arise during a long-term stay.

I would sugest that you check out the following forums.
http://britishexpats.com/forum/
http://www.expatfocus.com/index.php?name=Forums&file=viewforum&f=54
You can get answers on these from people like yourself who have done it. also by searching the forums you will find some of your questions already answered,
PS are you from Benbecula?

I'll just take a peek at the forums. Thanks.

PS are you from Benbecula?

Unfortunately I've never been there, I'm a tad further south.

ps. Just checked the forums, I could be in for a long night. Thanks.