Hi Robert - here are my thoughts....
"Should I;
rectify current at top or base of tower and transmit as 12V DC. Not rectify and leave this till it gets to battery shed. Does generating single phase vs 3 phasse affect this decision?"
If you rectify it at the top of the tower, the rectifiers will cool better... but should they fail you'll probably be free- spinning (overspeeding).
If you rectify it at the bottom of the tower, you only need to run 2 lines from the tower to the batteries - which is nice, and DC covers the distance with a bit more efficiency than AC.
I prefer to rectify them near the batteries - this means running 3 lines from the machine, to the rectifiers (if you use 3 phase). The main reason... I feel the rectifiers will stay dry, theyll be easy to replace and I can locate the "kill switch" next to them, but the kill switch will be on the windmill side of the rectifiers. I find sometimes on a very windy day - it's rare that the machine slows enough so that I'd feel safe shorting the alternator through the rectifiers. I just feel safer not shorting the output from the rectifiers, but rather shorting the AC straight from the alternator.
Any way you go though should work fine. Single phase vs 3 phase shouldn't affect your decision too much, but I'd avoid single phase - 3 phase has its advantages all around.
"What cable size should I use? Is multistrand insulated copper with area of 5mm squared (about 0.04 square inches) OK? This is what I am using for all my other 12V wiring."
I dont know my metric conversions very well. There should be a chart online though that will tell you voltage drop over a distance for any given current level - I'd work from that.
"How can I divert power to a hot water heating element when batteries do not need charging. This must be automatic as we are only there once each week and could not always be able to switch power manually."
A Trace (Xantrex) C-40, or C60 would do nicely... and there are other brands that should be fine too. Anything that will work as a diversion controller (which is what you need here)
Or...if you have a Trace SW series inverter, they have some Aux relays which can be adjusted to turn a load on, or off... depending on battery voltage. It's a bit more primitive, but works OK - that's how my system works.
Slip rings vs twisted cable. Which is better?
I like the simplicity and reliability of the "dangling cord" - up here, even on short towers in turbulant sites, they dont need to be unwound very often. I like to dangle the cord, and put a big, locking plug/socket on the bottom of it so that it's an easy matter to unplug it, untwist it.. and then your good again. My current machine went up in January... I've not had to untwist the wire yet.