It appears that i have fixed it.
What I did was "mark the application for deletion" in meraki. This removed it from meraki.
I then went onto the VPP section in meraki and did a sync.
Then, switching to the the "apps" section, i clicked Import -> Licensed ISO app. The application was displayed, still saying 0/2 licenses available.
After adding it, it still said 0/2 licenses available, but in the VPP section I could no longer bring up the list of installed serial numbers.
So just to try, I added the tag for the device i want it to install on. Waited a few minutes and refreshed the app page. It now says 1/2 licenses available and has applied the license to the correct device now!
so basically, delete application from meraki, re sync to VPP and re import. Then re add to the device and for some reason this caused everything to fall back into sync.
Thanks all for your good advice. Hopefully this helps someone else going forward. Up until the very last step, where i re-assigned the application to the device, it was still saying the wrong license count.