Rentfree --
One week after I submitted my application to the embassy, I received everything back with the cover letter that you described. Though my circumstances are a bit different than yours, I sent them back the next day additional documentation showing that I had a "permanent" address here (in the form of a copy of an electric bill), and of my intention to remain in the UK (in the form of an employment contract) through the end of 2005.
A week after that, I received a postcard from them letting me know they had received my paperwork and were processing the application.
[Had they sent everything back to me once more, I was planning to call the embassy number and pay the ~ 95p/min ...]
Hope this helps...