Last night I had my nearside wheels in mud and my offsides on a solid surface (on a slight down hill slope) . I went to reverse uphill and I could hear the TC engaging but the Disco wouldnt move. Should this of happened? thought TC was supposed to transfer the power to the wheels with grip?

no, it applies the brakes to the wheels that are slipping. that directs the torque to the other wheels via the differentials

So does that mean that there is something wrong with my diffs if it didnt transfer the torque to the other wheels?

traction control is a very good tool, however it wont lock your diffs, given the way it works. It's difficult to say what happened and why you lost traction but I wouldnt conclude there's anything wrong with your diffs given that scenario.

If you were reving the knacks off it, TC will be very ineffective.

one side on the hard standing and the other on slippery stuff would screw a disco 1 with difflock as the traction is lost on each axle and on the same side. the only 100% way in that scenario is a axle difflocker or a LSD on each axle.