Pete:
Sounds like your gnuradio install works fine, but getting the blocks for RTL SDR is an issue.
Did you try building gr-osmosdr from source?
Another possibility is that gnuradio just can't find the osmo blocks. In that case you would need to move the blocks from where they were installed, or else add the location of the blocks to the pythonPATH search variable. Default install paths can cause problems.
I have a friend who has RPI+RTL set up to listen to FM radio, so I know it CAN work.
Cheers,
Nick