I've tried manually flushing the permalinks and also tools > permalinks > save but still it's not working! Does any one else have any ideas of what may be breaking it?
The fact that your
single-posttypeslug.php is not used by the WordPress template hierarchy has nothing to do with the permalinks (or better said pretty permalinks).
You most probably haven't used the actual slug of your custom post type in the file name. It's the first argument of the register_post_type function call.