Does the time allocated to the recital in DipABRSM include pauses between pieces/movements, stool adjustment etc? Has anyone ever penalised because the music's actual playing time is a couple of minutes shorter than stated? Or does the pausing etc make up for this?

The time includes breaks (and up to 5 minutes for woodwind, brass and singing candidates).

It's important to think about the effects of silence in a performance; the audience (of two in this case) needs a space to appreciate what has gone before and to prepare for what is to come. Each item needs a space around it for musical, as well as practical reasons.

It might be helpful to imagine that you are playing in a concert, and to leave space for applause. Imagining rapturous applause might be good for the nerves.