Ive noticed that when using my DFP in LFS, if i want to try and do a bit of left foot braking whilst simultaneously keeping some throttle applied, all that happens when you dab the brakes is that the amount of throttle applied, reduces. So you cant have both the brake and throttle depressed at the same time.

However when using the same wheel on my PS2 in Grand Turismo 4, you can press both the brake and throttle at the same time and the machine detects each pedal seperately.

How can this be, and is there a way of seperating the brake and throttle axis on a DFP when using it in LFS?

yes , in your game controller settings in windows

Is it set up like this in Control Panel>Game Controllers?

Try finding and installing the Logitech Profiler software if you can't set the options in Control Panel -> Game Controllers -> Properties (of the DFP)