Thanks for the update.
I doubt very much that iTunes distinguishes in any way whether a card if pre-paid or not. As far as I know there is no way to know, just from the credit card info, what features a card has. For instance, my card is actually a debit card. iTunes treats it just like a credit card. Only my bank knows otherwise.
As such, I'm sure the iTunes guy told you exactly what they are seeing from their end. The 1.58 charge would have nothing to do with your actual purchase, and would not show up in your purchase history. It's just the amount that iTunes used to confirm the card. Apparently twice, because of some glitch caused your card to appear as declined the first time. Lots of possibilities there, and and it doesn't have to be on either the bank's or iTune's end. A network delay could plausibly delay a response long enough for iTunes to assume it was declined.
Anyway, it sounds like it should sort it self soon, and if it doesn't I'm sure your bank will sort it if you call them.
As for the 1.58 amount, my guess is that's the exchange rate that applied. Apple normally uses $1 in the U.S., and since they probably use the same servers, you bank simply applied the current value in pounds.
Just checked, and the exchange rate is currently 1 USD = 1.5759 GBP.
I'd have said more of this the first time, but my brain needed time to retrieve the information. The hardware is a bit dated.