Had new oil seal fitted on right hand side of vehicle as old one was leaking, and having checked it since getting the car back I can pull the drive shaft out of the housing by about an inch, by hand. Should it be retained in any way, and will it hurt driving it like this before corrected.

Did you get the work done at a dealership?  Whoever did the job probably broke off the spring loaded ring that holds the axle in place.  The ring is on the splined part of the axled shaft itself and compresses as the axle is pushed through the side gear in the differential and then expands once it is passed it holding the axle in place. 

It might be floating around inside your diff.  Bring it back!

Had new oil seal fitted on right hand side of vehicle as old one was leaking, and having checked it since getting the car back I can pull the drive shaft out of the housing by about an inch, by hand. Should it be retained in any way, and will it hurt driving it like this before corrected.

If you truely have an inch of space this is an issue and should be fixed ASAP. But if its more like a 1/4 an inch this is normal there is some play in this part do to the shift on the fly stuff in the diff.

George