Looks like nobody on here has any experience with this.
So for anyone looking for a solution to the same problem; I simply couldn’t find one other than to attack the problem from a completely different angle…
So now instead of intercepting the incoming data on API v1, I now instead hook into woocommerce_after_product_object_save to perform the actions I want to after the product has been inserted into wordpress.
It’s far from ideal and somewhat hacky as it leaves a mess of redundant taxonomy behind… So if someone has any further information surrounding capturing and modifying incoming submissions on API v1 with woocommerce_rest_prepare_product / woocommerce_rest_prepare_product_object then please feel free to chime in and save the day.
Thanks.