What is wrong with my understanding about total pressure for a rocket nozzle?
I'll just answer my own question thanks to Koyovis' comment  :) 

Koyovis was right - I didn't realise the difference between how dynamic pressure is calculated for compressible vs incompressible flows.
There are some useful notes on it on pages 4-8 of this link (http://mae-nas.eng.usu.edu/MAE_5420_Web/section5/section.5.5.pdf)

In summary:
Bernoilli’s equation is

$Total Pressure = P_{static} + P_{dynamic}$

For an incompressible flow, 
$P_{dynamic} = 0.5\rho v^2$

For a compressible flow, use the isentropic equation
$P_t / P_{static} = (1 + \frac{\gamma – 1}{2} M^2) ^ {\frac{\gamma}{\gamma-1}}$

To get this in a way you can compare to Bernoilli's equation, make total pressure the subject of the equation, add &amp; subtract $P_{static}$ from the right hand side, and rearrange the equation slightly (shown in the link above) gives:

$P_t = P_{static}  +P_{static} ( (1 + \frac{\gamma – 1}{2} M^2) ^ {\frac{\gamma}{\gamma-1}}-1)$

This is the same form as Bernoilli’s equation where the dynamic pressure is:
$P_{dynamic}=P_{static} ( (1 + \frac{\gamma – 1}{2} M^2) ^ {\frac{\gamma}{\gamma-1}}-1)$

Putting in the values from the example gives the correct result.