title_prefix override to h1 instead of h2
Potential solutions that didn't work:

http://drupal.org/project/panel_variant_page_title 
Changing panels-pane-tpl.php h2 to h1 as this changes all panels not the 1 page panel that needs to be h1.

Eventual solution:

Turning off Page panel titles and just hardcoded h1 tag into body field. Not ideal but there really is no working solution apparently.