Described lock up happens on my 400D with both 55-250IS and 18-55IS,
with 2 different batteries, and with 2 different CF cards. So, seems
to be a body thing more than anything else. Have had it happen with 2
bars left on the battery meter as well as 1 bar.
Is this a fault or is it normal behaviour?
Yes, it could be body related, more specifically might also depend on the firmware (i.e. the software in the camera). A firmware update might fix it, or cause it, or it might not make a difference at all.
Which version is yours?.
As mentioned, think about the problem. The camera is supposed to detect how much power is left in the battery, it's not that precise a measurement. The 400D in particular has a relatively "weak" battery, you may have noticed that Canon put a much stronger battery in the 450D. Also, compared to older cameras, the 400D has a stronger processor than the 350D, so it probably uses more power.
Now, the battery warning will kick in when the power reaches a certain low limit.
If it so happens that - also a question of battery age and how well it still holds charge - that you have a rather big power load - e.g., you just took a picture, IS still running, processor is processing the jpg in the internal memory, perhaps flash recharging, then it could be that the battery won't cope with the load, and
the camera sort of just stop anywhere in its program.
Normally the low power warning trigger point should be high enough that you still can shut down properly, but I am not sure that one can consider every circumstance when programming the firmware, and uncontrolled power-downs might happen.
It has to be a balance with the battery capacity, you could set the shut down level quite high, but then you could perhaps only shoot half the number of pictures, certainly not something desired.
If you run out of batteries, and the the camera looks up, but
everything is back to normal when you change the battery, there
is really nothing much to complain about, since you have to change the battery anyway - though perhaps you lost a shot that you have to retake - if you can.
Trying to eek out the last picture from the battery is not a good idea anyway,
the LiIon batteries are better not run down completely - unlike NiMH -
and it's better to recharge them after every use, even if they are not empty.
In case of the PDA that I mentioned in previous posts, when it shut down because of low battery, I usually could take out the batteries and reuse them still in electronic clocks for a long time. The PDA dropped the voltage of the battery from 1.5 to 1.25, so there was still plenty of charge left in the battery. It's just that the PDA set a relatively high point for shutting down to be on the save side.